Chapter 2 explains the difference between positive analysis...

Name: Problem 4, Chapter 23: Principles of Macroeconomics
Uploaded: 2019-07-06T13:12:22-08:00
Duration: 4 min 29 s
Channel: Yi Chun Lin
Description: Chapter 2 explains the difference between positive analysis and normative analysis. In the debate about whether the central bank should aim for zero inflation, which areas of disagreement involve positive statements and which involve normative judgments?

Chapter 2 explains the difference between positive analysis and normative analysis. In the debate about whether the central bank should aim for zero inflation, which areas of disagreement involve positive statements and which involve normative judgments?

Key Concepts

Normative Analysis

Normative analysis relates to value-based statements about what should be done, reflecting opinions and societal priorities. In the central bank debate, normative judgments concern whether achieving zero inflation is desirable based on broader economic or ethical considerations. These judgments involve debates about the trade-offs between inflation and other macroeconomic goals, such as employment and growth, as well as differing views on the role of government or central bank intervention in shaping economic outcomes. They are fundamentally subjective, relying on individual beliefs about fairness, welfare, or the ideal economic environment.

Positive Analysis

Positive analysis involves objective, fact-based statements that describe relationships in the economy without making value judgments. In the debate over whether the central bank should aim for zero inflation, positive statements focus on empirical evidence—such as historical data on inflation and its impacts on economic variables, predictions about how zero inflation might affect unemployment or growth, and analyses using economic models to forecast outcomes. These statements are testable and verifiable regardless of individual preferences or ideologies.

Transcript

00:02 Okay, question four.

00:04 Chapter 2 explains the difference between positive analysis and normative analysis.

00:11 In the debate about whether the central bank should aim for zero inflation, which areas of disagreement involve positive statements and which involve normative judgments.

00:26 So here i extract the first paragraph of the part of the part.

00:32 Talking about zero inflation.

00:37 So these are the reason why some people are not in favor of government, of the government aiming for zero inflation.

00:46 So this is just the first paragraph.

00:48 So if we look at the first paragraph, we have to tell which is normative statement and then which is positive statement.

00:56 So we have to recall that positive statement is something that is just telling you about the fact.

01:04 The normative has some judgmental statement that might not be true if you have opposite opinions.

01:13 Okay, so first sentence is saying that price stability may be desirable, but the benefits of zero inflation compared to moderate inflation are small, whereas the cost of reaching zero inflation are large.

01:29 So the first sentence, here actually does not provide any evidence.

01:40 It does not provide any evidence of why the cost of reaching zero inflation are large.

01:46 Why is it large? so actually if we if we don't look at any what it is going to save in the following sentences, we can put a question mark here.

02:00 I can say i actually don't agree with you because i think there's no cost of reaching zero inflation.

02:07 So in this scenario, i would say that the first sentence is a normative statement.

02:12 So i'll just write in here because it does not provide any like fact to you...

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