Chapter 1, Problem 2FRQ

To determine

The question requires us to analyze which economic problems will have exact right and wrong answer and which do not necessarily have a right answer. The question also requires us to determine the reason behind disagreement of economists.

Explanation of Solution

Generally, economic analysis can be seen in two ways; Normative and positive.

In positive economics, economic analysis help in getting the answer as exactly it is or the way it is. Such analyses have definite right or wrong answers. On the other hand, the economic analysis that tries to find the solution based on the ‘how the economy should be’ approach is considered normative economics.

Economists tend to disagree more in a matter of normative analysis because, in normative analysis, the exact answer (Yes or No) is not possible. Mostly, the answer is based on different circumstances and assumptions so the interpretation and final outcome will vary with economists.

Therefore,

• In positive economic analysis, questions have exact right or wrong answer.
• In normative analysis, questions do not necessarily have a right answer.
• Economists tend to disagree more on normative economic problems.
• Due to new policy questions and continuous changes in the validity of approaches, the economists disagree.