Complete the following statement on the scope and methodology of economic analysis.

Answer:Economic analysis that focuses on objective explanation and verifiable facts about 'what is' is known as 【positive】 economics, whereas analysis based on value judgments and subjective opinions about 'what ought to be' is known as 【normative】 economics.

Answer

The first blank is 'positive' and the second blank is 'normative'.

Positive economics is concerned with objective, testable statements about economic reality ('what is'). In contrast, normative economics deals with value judgments, fairness, and ethical views regarding what policy goals or conditions 'ought to be'.

Step-by-Step Solution

Analyze the branch of economic enquiry dealing with empirical facts, testable hypotheses, and objective observations.

This defines positive economics, which describes economic phenomena as they exist without personal bias.

Positive economics focuses strictly on cause-and-effect relationships and factual statements.

Analyze the branch of economic enquiry dealing with ethics, policy recommendations, and subjective statements.

This defines normative economics, which discusses what policy measures or outcomes should be pursued.

Normative economics relies on value judgments that cannot be proven or disproven by data alone.

Key Concept

Positive and Normative Economics

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