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Economic Policy

Economic Policy - an increase in prices” belongs to the...

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Economic Policy An  economic policy  is a course of action that is intended to influence or control the behavior of the  economy. Economic policies are typically implemented and administered by the government.  Examples of economic policies include decisions made about government spending and taxation,  about the redistribution of income from rich to poor, and about the supply of money. The  effectiveness of economic policies can be assessed in one of two ways, known as  positive  and  normative  economics.  Positive and normative economics. Positive economics  attempts to describe how the economy  and economic policies work without resorting to value judgments about which results are best. The  distinguishing feature of positive economic hypotheses is that they  can be tested  and either  confirmed or rejected. For example, the hypothesis that “an increase in the supply of money leads to 
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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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