Which of the following are positive economic statements and which are normative economic statements?
a. An increase in the minimum wage causes unemployment.
b. The government should raise the minimum wage above $7.25 per hour.
c. The prolonged recession has caused the unemployment rate to reach a 30-year high.
d. Interest rates need to be lower for the economy to emerge from the recession.
e. Inflation has decreased since the onset of the recession.
f. Once the recession has ended, interest rates should increase to assure that inflation does not go up.
What will be an ideal response?
Statements a, c, and e are positive economic statements. Statements b, d, and f are normative economic statements.
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One way that government can increase the production of goods that have external benefits is to
A) tax the activity. B) subsidize the activity. C) use marketable permits. D) Both answers B and C are correct.
The Baker Plan for addressing the debt crisis was based on the assumption that
A) most countries would eventually default on their debt. B) forgiveness of some of the debt was inevitable. C) renewed lending by U.S. and European banks would undermine push for economic reforms. D) hyperinflation would eventually reduce the real value of the debt. E) renewed lending by U.S. and European banks would restore growth and make the debt manageable.