Which of the Following Is a Normative Economic Statement

question 99

Multiple Choice

Which of the following is a normative economic statement?

• A) If the government increases spending, unemployment will fall.
• B) The government should increase spending during times of economic recession.
• C) If banks create more money, unemployment will decrease.
• D) If the price of gasoline rises, car pooling will increase.

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Definitions:

Consumer Surplus

The difference in the amount consumers are prepared and have the means to pay for a service or good compared to the amount they actually do pay.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, often depicted as the area above the supply curve and below the market price.

Average Cost

The total cost of production divided by the number of goods produced; also known as per unit cost.

Average Variable Cost

The unit cost of producing each product, calculated by dividing the variable costs (costs that vary with output) by the number of units produced.