Robert and Janet are discussing unemployment and inflation in their country. Robert, on the basis of a recent newspaper report, claims that a 5% reduction in unemployment will lead to a 2% rise in inflation
On the other hand, Janet insists that inflation is a far bigger problem than unemployment and should be addressed with prime importance. Classify Robert's and Janet's statements as descriptive or advisory. Explain your answer.
Robert claims that a 5% reduction in unemployment will lead to a rise in a 2% in inflation. This statement represents predictions that can be verified with data. Therefore, Robert's approach is positive, which means it is an analysis of things as they are. Positive economics describes what has happened or predicts what will happen. The conclusion of his statement can be verified with data and is not subject to his tastes and preferences.
Janet claims that inflation is a far bigger problem than unemployment and should be addressed with prime importance. Janet's statement is normative. Normative economics is analysis that recommends what people ought to do. Unlike Robert's statement, Janet's belief that inflation is a bigger problem than unemployment is based on her values and/or ethical judgments. Therefore, while Robert's statement is descriptive in nature, Janet's statement is advisory.
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The supply of stock
A) comes from new issues. B) comes from current shareholders. C) comes from new shares and current stockholders. D) comes from new shares, current stockholders, and the Federal Reserve.
Which would tend to reduce the crowding-out effect that occurs when the Federal government increases its borrowing to finance a deficit?
A. The economy is operating at full employment B. The economy is operating at less than full employment C. The expenditures fail to contribute to the development of human capital D. The deficit financing reduces the profit expectations of business firms