Positive Economics deals with ______.

How the different mechanisms function

The correct answer is Option (4) → How the different mechanisms function

Positive Economics is concerned with describing and explaining economic phenomena as they are, without making value judgments. It deals with facts, cause-and-effect relationships, and how different economic mechanisms function in reality. So, Positive Economics answers questions like:

• How does a rise in interest rates affect savings?

• What happens when taxes are increased?

In contrast, Normative Economics deals with what should be done and involves value-based judgments.