Lesson 4: Positive Economics

Versus Normative Economics

Positive Economics
Deals with what is
Things that are actually happening such
as the current inflation rate, the number of
unemployed labor, and the level of the
Gross National Product
Overview of what is happening in the
economy that is possibly far from what is
ideal
Normative Economics
Deals with what should be
That which embodies the ideal such as the
ideal rate of population growth or the
most effective tax system.
Focuses on policy formulation that will
help to attain the ideal situation.