Question

Which of the following is a statement of positive economics? a. An unemployment rate greater than 8 percent is good because prices will fall. b. An unemployment rate of 7 percent is a serious problem. c. If the overall unemployment rate is 7 percent, unemployment rates among AfricanAmericans will average 15 percent. d. Unemployment is a more severe problem than inflation.

Short answer

Option c: If the overall unemployment rate is 7 percent, unemployment rates among AfricanAmericans will average 15 percent, is the statement representing positive economics.

Step-by-step solution

Option a

An unemployment rate greater than 8 percent is good because prices will fall. This statement is presenting a value judgment on whether an unemployment rate greater than 8 percent is 'good' or not. This is an example of normative economics, not positive economics.

Option b

An unemployment rate of 7 percent is a serious problem. This statement is also making a judgment about whether an unemployment rate of 7 percent is a 'serious problem' or not. This is another example of normative economics, not positive economics.

Option c

If the overall unemployment rate is 7 percent, unemployment rates among AfricanAmericans will average 15 percent. This statement is simply presenting a fact or observation without expressing any judgment or opinion. This is an example of positive economics.

Option d

Unemployment is a more severe problem than inflation. This statement is making a value judgment by comparing unemployment and inflation. This is another example of normative economics, not positive economics. Based on the analysis, we can see that

Option c

If the overall unemployment rate is 7 percent, unemployment rates among AfricanAmericans will average 15 percent, is the statement representing positive economics.

Key concepts

Unemployment Rate

Understanding the unemployment rate is crucial in economics. The unemployment rate is the percentage of people in the labor force who are actively looking for work but cannot find employment. This measure provides insight into the state of an economy. High unemployment rates often indicate economic distress, whereas low rates may suggest that the economy is doing well.

However, it's essential to consider factors that influence the unemployment rate, such as economic conditions, technological changes, and demographic trends. It's not merely a standalone figure; it encompasses various elements. Additionally, different demographics might experience unemployment differently, as mentioned in the exercise, where African Americans might have a higher unemployment rate compared to the overall national rate.

Value Judgments

In economics, value judgments involve opinions and beliefs about what is desirable or desirable policies. These statements tell us what ought to be, rather than what is. For example, when someone says "an unemployment rate greater than 8 percent is good," they're expressing a personal or societal valuation. This is a normative statement because it involves a subjective judgment.

Normative economics is often contrasted with positive economics, which focuses on objective analysis and facts. It's important to distinguish between these concepts when discussing economic policy, as it's easy for opinions to blur the lines between fact and value-based assertions.

Economic Statements

Economic statements can fall into two main categories: normative and positive economics. Positive economic statements are objective and fact-based, focusing on what is or observable phenomena. For instance, saying "if the unemployment rate is 7 percent, unemployment rates among African Americans will average 15 percent" is a positive economic statement because it's based on data and observation without judgment.

In contrast, normative statements reflect opinions or how things should be, like deciding whether a 7 percent unemployment rate is a serious problem. Understanding this distinction is critical for students of economics, as it helps in analyzing data and policy proposals without letting personal biases cloud objective findings.