Positive and Normative Economics
Positive economics is objective, factual analysis of economic relationships and phenomena that can be tested empirically. Normative economics involves value judgements about what outcomes are desirable and what policies should be pursued. Positive economics answers 'what is'; normative answers 'what should be'.
Real World
The statement 'UK inflation was 4.0% in January 2024' is positive economics, while 'The Bank of England should raise interest rates to reduce inflation' is normative — it depends on whether you value price stability over economic growth.
Exam Focus
When asked to 'distinguish', give one positive and one normative statement using the same economic issue for full marks.
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