Question

In: Economics

Positive economic analysis deals with_________________________ and normative economic analysis deals with_____________________ (a)What should be, what is...

Positive economic analysis deals with_________________________ and normative economic analysis deals with_____________________

(a)What should be, what is

(b)What is, what ought to be

(c)Fiction, fact

(d)Positive things, negative things

A leftward shift in the PPF curve of a country’s economy given ceteris paribus could be caused by:

(a)An improvement in technology

(b)A decrease in resources

(c)An increase in entrepreneurship

(d)All of the above

Solutions

Expert Solution

First Question: Economics has two branches positive economics and normative economics. Positive Economics deals with "What is" that means it is objective and fact-based. Under positive economics, there is no judgement and things can be proved. But in normative economics, we deal with "what ought to be" or "What Should be" that means it is subjective and opinion-based. Under this economics, we see how things should be not how they are.

Hence, the correct answer is Option (B) i.e. Postive economic analysis deals with "What is" and Normative economics deal with " What ought to be".

Second Question: PPF curve shows all the combinations of two goods which an economy can produce with the available resources. Any factor which will lead to a reduction in the production of goods and services in the economy will cause a leftward shift in the PPF curve. For example, Natural disasters, reduction in the availability of resources, decrease in capital investment etc. Hence, the correct answer is Option (B) i.e. PPF curve will shift left when there will be a decrease in resources as the economy will produce fewer goods.

Other two options (A) improvement in technology and (C) increase in entrepreneurship both will increase the production. So, it will cause a rightward shift in the PPF curve. Hence these two options are incorrect.


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