Macroeconomic Chapter 1: The Science of Macroeconomics What is economics? Normative Definition Economics is the science that studies how to efficiently allocate economic resources Positive definition economics is the science that studies how an economy operates or how economic variables are determined under the given economic system The System of an Economy: The economic system can briefly be distinguished in terms of The ownership: private ownership and public ownership The mechanism of resource allocation: planning mechanism and market mechanism1 Macroeconomics Chapter 1: The Science of Macroeconomics What is Economics? ➢ Normative Definition: Economics is the science that studies how to efficiently allocate economic resources ➢ Positive Definition: Economics is the science that studies how an economy operates or how economic variables are determined under the given economic system. The System of an Economy: The economic system can briefly be distinguished in terms of ➢ The ownership: private ownership and public ownership ➢ The mechanism of resource allocation: planning mechanism and market mechanism