Introduction to Business EconomicsMTP Nov 23Question 705 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 tests your understanding of positive versus normative statements in economics. • A positive statement is objective and fact-based. It describes "what is" and can be tested or proven true or false. It does not involve value judgments. • A normative statement is subjective and value-based. It describes "what ought to be" or "what should be" and involves opinions, beliefs, or recommendations. It cannot be proven true or false. • Option (C) "The unemployment rate should be less" is a normative statement. The word "should" indicates a value judgment or an opinion about a desired state. It expresses a goal or a recommendation, not a verifiable fact. • Option (A) "Large government deficits cause an economy to grow more slowly" is a positive statement. This is a testable hypothesis about a cause-and-effect relationship that can be analyzed using economic data and models. • Option (D) "Printing too much money causes inflation" is also a positive statement. This is a well-established economic principle (Quantity Theory of Money) that describes a factual relationship between money supply and price levels, which can be observed and tested. • Options (A), (B), and (D) are all positive statements because they describe economic phenomena or relationships that can, in principle, be proven or disproven through empirical evidence. Only option (C) expresses a subjective opinion or a desired outcome.

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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