Practice Quiz

CLEP Microeconomics Exam Prep

Category - Microeconomics

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In a legislative meeting designed to investigate new standard of living changes, a number of politicians contemplating whether there should be an increase in minimum wages or a provision of small business tax cuts. This is an example of:
  1. Trickle down economics
  2. Positive economics
  3. Normative economics
  4. Negative economics
Explanation
Answer - C - This is an example of normative economics.

Key Takeaway: Normative economics studies the way the economic realities of a society should be and not how it is. For example, those wishing to raise the standard of living for the lowest paid members of a society can propose to raise minimum wage figures. Alternatively, the provision of tax cuts to small businesses can lead to more hiring and an increase in standards of living.
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