Unformatted text preview: an increase in prices” belongs to the realm of positive economics because it can be tested by examining the data on the supply of money and the level of prices. Normative economics involves the use of value judgments to assess the performance of the economy and economic policies. Consequently, normative economic hypotheses cannot be tested . For example, the hypothesis that “the inflation rate is too high” belongs to the realm of normative economics because it is based on a value judgment and therefore cannot be tested, confirmed, or refuted. Not surprisingly, most of the disagreements among economists concern normative economic hypotheses....
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- Fall '10
- Normative Economics, economic policies, normative economic hypotheses