【正文】 tive statements are prescriptive and make a claim about how the world ought to be. Here is an example. Positive: A rapid growth rate of money is the cause of inflation. Normative: The government should keep the growth rate of money low.8. The Council of Economic Advisers is a group of economists who consult with the president of the United States about economic matters. The Council consists of three members and a staff of several dozen economists. It writes the annual Economic Report of the President.9. Economists sometimes offer conflicting advice to policymakers for two reasons: (1) economists may disagree about the validity of alternative positive theories about how the world works。t rise.16. To make an intelligent decision about whether to reduce inflation, a policymaker would need to know what causes inflation and unemployment, as well as what determines the tradeoff between them. Any attempt to reduce inflation will likely lead to higher unemployment in the short run. A policymaker thus faces a tradeoff between the benefits of lower inflation pared to the cost of higher unemployment.UNIT2SOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. Economics is like a science because economists devise theories, collect data, and analyze the data in an attempt to verify or refute their theories. In other words, economics is based on the scientific method. Figure 1 shows the production possibilities frontier for a society that produces food and clothing. Point A is an efficient point (on the frontier), point B is an inefficient point (inside the frontier), and point C is an infeasible point (outside the frontier).Figure 1 The effects of a drought are shown in Figure 2. The drought reduces the amount of food that can be produced, shifting the production possibilities frontier inward.Figure 2 Microeconomics is the study of how households and firms make decisions and how they interact in markets. Macroeconomics is the study of economywide phenomena, including inflation, unemployment, and economic growth.2. An example of a positive statement is “higher taxes discourage work effort” (many other answers are possible). That’s a positive statement because it describes the effects of higher taxes, describing the world as it is. An example of a normative statement is “the government should reduce tax rates.” That is a normative statement because it’s a claim about how the world should be. Parts of the government that regularly rely on advice from economists are the Treasury Department in designing tax policy, the Department of Labor in analyzing data on the employment situation, the Justice Department in enforcing the nation’s antitrust laws, the Congressional Budget Office in evaluating policy proposals, and the Federal Reserve in analyzing economic developments (many other answers are possible).3. Economic advisers to the president might disagree about a question of policy because of differing scientific judgments or differences in values.Questions for Review1. Economics is like a science because economists use the scientific method. They devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories about how the world works. Economists use theory and observation like other scientists, but they are limited in their ability to run controlled experiments. Instead, they must rely on natural experiments.2. Economists make assumptions to simplify problems without substantially affecting the answer. Assumptions can make the world easier to understand.3. An economic model cannot describe reality exactly because it would be too plicated to understand. A model is a simplification that allows the economist to see what is truly important.4. Figure 3 shows a production possibilities frontier between milk and cookies (PPF1). If a disease kills half of the economy39。why work if you can get ine for doing nothing? The economy isn’t operating efficiently if people remain unemployed for a long time, and unemployment benefits encourage unemployment. Thus, there’s a tradeoff between equity and efficiency. The more generous are unemployment benefits, the less ine is lost by an unemployed person, but the more that person is encouraged to remain unemployed. So greater equity reduces efficiency.13. Since average ine in the United States has roughly doubled every 35 years, we are likely to have a better standard of living than our parents, and a much better standard of living than our grandparents. This is mainly the result of increased productivity, so that an hour of work produces more goods and services than it used to. Thus ines have continuously risen over time, as has the standard of living.14. If Americans save more and it leads to more spending on factories, there will be an increase in production and productivity, since the same number of workers will have more equipment to work with. The benefits from higher productivity will go to both the workers, who will get paid more since they39。s monopoly power. e. Equityf. Efficiency: There is an externality because of accidents caused by drunk drivers.12. a. If everyone were guaranteed the best health care possible, much more of our nation39。t play. The probability of making mistakes is very high. You will also be faced with tough choices about the music industry pared to other parts of the economy. If you produce more sports equipment, you39。ll be producing too many CDs by artists that people don39。t find a job will get no ine at all, so the distribution of ine will bee less equal. But the economy will be more efficient, since welfare recipients have a greater incentive to find jobs. Thus the change in the law is one that increases efficiency but reduces equity.9. By specializing in each task, you and your roommate can finish the chores more quickly. If you divided each task equally, it would take you more tim