Introduction to Business EconomicsMTP Aug 18Question 644 of 209
All Questions

Which of the following statements would you consider to be a normative one?

Options

AFaster economic growth should result if an economy has a higher level of investment.
BChanging the level of interest rates is a better way of managing the economy than using taxation and government expenditure.
CHigher levels of unemployment will lead to higher levels of inflation.
DThe average level of growth in the economy was faster in the 1990s than the 1980s
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option b — Changing the level of interest rates is a better way of managing the economy than using taxation and government expenditure.

All Options:

  • AFaster economic growth should result if an economy has a higher level of investment.
  • BChanging the level of interest rates is a better way of managing the economy than using taxation and government expenditure.
  • CHigher levels of unemployment will lead to higher levels of inflation.
  • DThe average level of growth in the economy was faster in the 1990s than the 1980s

Detailed Solution & Explanation

• Normative statements express opinions or value judgments about what "should be" or "ought to be." They are subjective and cannot be proven true or false. • Option (B) is a normative statement because it expresses an opinion or a value judgment: "Changing the level of interest rates is a better way of managing the economy..." The word "better" indicates a subjective preference or belief, not an objective fact. Different economists might have different opinions on the "best" way to manage the economy. • Option (A) is a positive statement. It suggests a cause-and-effect relationship that can be tested or observed: "Faster economic growth should result if an economy has a higher level of investment." While it uses "should," it implies a testable hypothesis about economic outcomes, not a value judgment. • Option (C) is also a positive statement. It posits a testable relationship between unemployment and inflation (the Phillips Curve concept). This is a hypothesis that can be empirically investigated. • Option (D) is a positive statement. It presents a factual claim about historical economic growth rates that can be verified or disproven by looking at data.

About This Chapter: Introduction to Business Economics

Paper

Paper 4: Business Economics

Weightage

5%

Key Topics

Meaning, Scope, Price Mechanism

This chapter lays the groundwork for understanding Business Economics as a discipline. It covers the meaning, scope, and nature of economics — including key distinctions like Microeconomics vs Macroeconomics, Positive vs Normative economics, and the fundamental economic problem of scarcity. Students learn how businesses use economic principles for decision-making in a competitive marketplace.

View Official ICAI Syllabus

Exam Strategy Tip

Focus on definitions and distinctions between concepts. Questions often test whether you understand the difference between Micro and Macro, or Positive and Normative statements.

Related Comparison Tables

Microeconomics vs Macroeconomics: The Complete CA Foundation GuidePositive vs Normative Economics: Fact vs Opinion

More Questions from Introduction to Business Economics

A study of how increases in the corporate income tax rate will affect the nation unemployment rate is an example of

In a ______ the producer is free to set up any type of firms produce goods and services of his choice.

In the beginning the word economics was

In Economics, we use the term scarcity to mean;

In a free market economy, allocation of resources is determined by

If there is no central planning authority to make the fundamental economic decisions and thus to allocate productive resources, how can then free enterprise or capitalist economy solve its central problems?

Ready to Master Introduction to Business Economics?

Practice all 209 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free