ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Resources are best allocated via the market mechanism.
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Government spending on healthcare should be increased.
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An increase in interest rates will reduce house prices.
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Pollution is the most serious of all economic problems.
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Detailed explanation-1: -Here’s an example of a positive economic statement: “Government-provided healthcare increases public expenditures.” This statement is fact-based and has no value judgment attached to it. Its validity can be proven (or disproven) by studying healthcare spending where governments provide healthcare.
Detailed explanation-2: -Positive statements are thus the opposite of normative statements. Positive statements are based on empirical evidence. For examples, “An increase in taxation will result in less consumption” and “A fall in supply of petrol will lead to an increase in its price".
Detailed explanation-3: -The correct answer is An increase in money supply implies a price rise in an economy.
Detailed explanation-4: -Normative statements usually contain the words “Must” and “Should, ” which indicate the subjectivity of the individual. Positive statements are based on facts or causal relationships. This statement seeks to explain something “as is” rather than “should” or “must.”