The Economic Analysis of Minimum Wage Involves Both Normative and Positive

question 110

Multiple Choice

The economic analysis of minimum wage involves both normative and positive analysis.Consider the following consequences of a minimum wage: a.The minimum wage law causes unemployment.
b.A minimum wage law benefits some groups and hurts others.
c.In some cities such as San Francisco and New York, minimum wage laws are necessary for low-skilled workers to stay in the city.
d.The gains to winners of a minimum wage law should be valued more highly than the losses to losers because the latter primarily comprises businesses.
Which of the consequences above are positive statements and which are normative statements?

• A)a, b, and c are positive statements and d is a normative statement.
• B)a and b are positive statements, c and d are normative statement.
• C)Only a is a positive statement, b, c and d are normative statements.
• D)a and c are positive statements, b and d are normative statements.

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Definitions:

Fiscal Policy

Government adjustments to its spending levels and tax rates to influence a nation's economy, aiming to manage economic output, inflation, and employment.

Aggregate Demand

The total demand for all goods and services in an economy at various price levels, at a given time.

Demand-Management Policy

A set of government measures intended to influence the economy by controlling demand, typically through fiscal and monetary policies.

Stagflation

A period of slow economic growth and high unemployment with rising prices.