classify each of the following statements as positive or normative. explain.

a. Society faces a short-run trade-off between inflation and unemployment

b. a reduction in the rate of money growth will reduce the rate of inflation.

c. The Federal Reserve should reduce the rate of money growth.

d. Society ought to require welfare recipients to look for jobs.

e. Lower tax rates encourage more work and more saving.

Answer:

a.         The statement that society faces a short-run tradeoff between inflation and unemployment is a positive statement. It deals with how the economy is, not how it should be. Since economists have examined data and found that there is a short-run negative relationship between inflation and unemployment, the statement is a fact, thus it is a positive statement.

b.         The statement that a reduction in the rate of growth of money will reduce the rate of inflation is a positive statement. Economists have found that money growth and inflation are very closely related. The statement thus tells how the world is, and so it is a positive statement.

c.         The statement that the Federal Reserve should reduce the rate of growth of money is a normative statement. It states an opinion about something that should be done, not how the world is.

d.         The statement that society ought to require welfare recipients to look for jobs is a normative statement. It doesn't state a fact about how the world is. Instead, it is a statement of how the world should be and is thus a normative statement.

e.         The statement that lower tax rates encourage more work and more saving is a positive statement. Economists have studied the relationship between tax rates and work, as well as the relationship between tax rates and saving. They have found a negative relationship in both cases. So the statement reflects how the world is, and is thus a positive statement.