Three Different Ways (Approaches) Can Be Used to Study Economics

Question

Examlex · Accepted Answer

The Answer is (a). Positive economics is the study of what is, and how the economy works without regard to the goals of an economy. Using economic reasoning to determine how tax revenue would change in response to a 5% income tax increase is an example of positive economics.
(b). Normative economics is the study of what the goals of the economy should be. Deciding whether government tax revenue should be used to build more tanks or to provide education grants is an example of normative economic analysis.
(c). The art of economics is the application of the knowledge learned in positive economics to the achievement of the goals in normative economics. Determining that a 5% income tax increase will generate $50 billion in tax revenue, which can be used to provide $10,000 grants to 5,000,000 students to help with college tuition is an example of the art of economics.
Which is best? There is no single "correct" answer here. It depends upon what questions you are addressing. If you are trying to understand how an economy functions, positive economics is the best approach. If you are trying to make policy recommendations, the art of economics is the best approach. Although one hopes that the art of economics receives the most votes.

Three Different Ways (Approaches) Can Be Used to Study Economics

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