Introduction to Business EconomicsMTP Nov 22Question 704 of 209
All Questions

Which of the following statements is normative?

Options

ALarge government deficits cause an economy to grow more slowly.
BPeople work harder if the wage is higher.
CThe unemployment rate should be less.
DPrinting too much money causes inflation
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Correct Answer

✅ Option c — The unemployment rate should be less.

All Options:

  • ALarge government deficits cause an economy to grow more slowly.
  • BPeople work harder if the wage is higher.
  • CThe unemployment rate should be less.
  • DPrinting too much money causes inflation

Detailed Solution & Explanation

• This question asks us to identify a normative statement. In economics, statements are classified as either positive or normative. • A positive statement is objective and fact-based. It describes "what is" and can be tested or proven true or false using data and evidence. It doesn't involve opinions or value judgments. • A normative statement, on the other hand, is subjective and value-based. It describes "what ought to be" or "what should be." It expresses an opinion, a belief, or a recommendation, and cannot be proven true or false empirically. • Let's analyze the options: • (A) "Large government deficits cause an economy to grow more slowly." This is a positive statement. Economists can study data on government deficits and economic growth to test if this relationship holds true. • (B) "People work harder if the wage is higher." This is also a positive statement. Economists can conduct studies and analyze labor market data to see if higher wages lead to increased effort. • (C) "The unemployment rate should be less." This is a normative statement. The word "should" indicates a value judgment or a goal. It expresses an opinion that a lower unemployment rate is desirable, rather than describing an objective fact. • (D) "Printing too much money causes inflation." This is a positive statement. Economic theory and historical data strongly support this relationship, which can be observed and tested. • Therefore, option (C) is the correct answer because it expresses a value judgment about what the unemployment rate ought to be.

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

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