The Difference Between Positive and Normative Economics Is That

question 175

Multiple Choice

The difference between positive and normative economics is that:

• A) positive economics is what you are learning in school whereas normative economics is what you will learn in the real world.
• B) normative economics is based on proven fact whereas positive economics is based on what should be.
• C) positive economics describes, explains, and predicts economic events whereas normative economics recommends what economic policies should look like.
• D) economists always use positive economics whereas politicians always use normative economics.

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Definitions:

Distortionary Tax

A type of tax that causes consumers and producers to change their behavior in order to avoid paying the tax.

Tax Distortion

Describes how taxes can alter market behavior and lead to efficiency loss compared to an untaxed market.

Optimal Taxation

The theory or practice of determining the most efficient and effective way of levying taxes to generate government revenue with minimal economic distortion or inefficiency.

Excess Burden

The societal expense resulting from market inefficiency, which arises when supply and demand are not in balance.