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8 May, 2015 - 10:19

The purpose of normative or political (or policy) economics is to study what should be. Forecasts are made using models. The predictions are then compared to commonly accepted goals of our society (such as that of full employment, economic freedom, equity) on the basis of standards, values or norms (such as a higher standard of living is desirable). Policies, or sets of recommended actions, are then derived from the comparison.

Once the economist has determined that selling more products will cause firms to hire employees, he/she may recommend to elected officials needed actions to stimulate sales if many workers are unemployed.