Ecenomic methodllogy

• What is the definition of a normative statement in economics?

  A normative statement expresses an opinion, such as "the government should increase spending to help reduce the unemployment rate."
• Why are normative statements considered biased?


  Because they are based on opinions and cannot be immediately tested for truth or falsehood.
• What is an example of a positive statement in economics?


  An example is "the unemployment rate is 8%."
• How do positive statements differ from normative statements?

  Positive statements are factual and unbiased, while normative statements are opinion-based and biased.
• Why do people use both positive and normative information?

  People use both to validate their opinions, as normative information alone may not be effective.
• What does the term "social science" refer to?

  Social science involves the study of human beings as individuals and groups and how they interact with each other.
• What does "ceteris paribus" mean in economics?

  Ceteris paribus means "all other factors remain the same."
• How does the concept of ceteris paribus apply when economists raise the price of goods?

  Economists assume that other factors, such as consumer incomes, do not change.
• What happens to the demand for bananas if their price increases, according to the example given?

  The demand for bananas would decrease, assuming other factors remain constant.
• What could cause the price of bananas to rise, according to the example provided?

  A new study showing that bananas have magical powers could cause the price to rise.
• What are the exam tips for answering questions about positive and normative statements?

  • Usually 4 markers
  • 2 marks for each definition:
  • Positive: based on fact, can be tested true or false
  • Normative: not based on fact, cannot be proven true or false
  • 2 marks for application (referencing the extract)
• What is an example of a positive statement made by a politician?


  A politician might use statistics to support their claims.
• How do news reporters typically use statistics?

  They use statistics when making predictions, such as "expected to rise by %."
• What do sports commentators focus on when discussing players?

  They focus on statistics, such as how many goals someone has scored.
• What type of information do teachers typicically use?

  Facts and interpritations.
• What is an example of a short-term positive consequence of a decision that disregards long-term consequences?


  Reducing taxes may win an election but can lead to public spending cuts.
• What is the definition of political judgments?


  Making effective and informed choices in government.
• What field of study is economics classified as?

  Economics is a social science.
• What tasks do economists undertake?

  • Develop theories and create models for exchange rates.
  • Use simplifying assumptions to limit variables.
  • Test theories against known facts using various tools.
  • Use empirical data to make predictions.
  • Use economic models for predictions.
• Why do economists struggle to make decisions?


  They cannot conduct controlled lab experiments and must observe the real world.
• What are the four steps economists conduct their experiments in?


  1. Observing consumer behavior in the marketplace.
  2. Forming a hypothesis about consumer spending.
  3. Developing predictions from the hypothesis.
  4. Using evidence to test the predictions.
• What are the two possible results of economists' experiments?


  1. Evidence supports the hypothesis, becoming the theory of demand.
  2. Evidence does not support the predictions, leading to a new hypothesis.
• How do economic theories often survive?


  By allowing a significant number of exceptions to their central predictions.
• What is the difference between positive and normative statements?


  • Normative economics is based on moral judgments and is not scientifically testable.
  • Positive statements can be tested and may be proven incorrect.
• Can you give an example of a positive statement?


  The Earth is flat is a positive statement that was once supported by evidence.
• What is a conflict that arises when judging decisions in economics?


  There is often a conflict between moral and political judgments.
• What was Donald Trump's zero tolerance policy on illegal immigration viewed as in the USA?


  It was viewed as immoral but politically beneficial.