IAI Actuarial Core Principles · Business Economics · Main economic schools and their key features
Which of the following is a normative economic statement?
The statement that the Reserve Bank should prioritise lowering inflation over supporting growth is normative because it expresses a value judgement about what ought to be done. The other statements describe facts or relationships that can be tested against evidence.
- AIndia's repo rate rose when inflation exceeded the target band
- BHigher fuel prices reduced demand for private car travel
- CThe Reserve Bank should prioritise lowering inflation over supporting growthCorrect
- DA rise in income increased demand for life insurance among urban households
- Unemployment in the economy fell after the stimulus was announced
Explanation
Normative statements involve value judgements about what ought to be. Only the statement using 'should' expresses a judgement. The others can be tested against data.
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