Question 1

According to classical economists,the relationship between the amount of funds firms invest and the interest rate is

Accepted Answer

A)  direct. 
B)  inverse. 
C)  indirect. 
D)  independent. 
A)  direct. 
B)  inverse. 
C)  indirect. 
D)  independent. B

Question 2

If the economy is in long-run equilibrium,the actual unemployment rate is less than the natural unemployment rate.

Accepted Answer

A) True 
 B)False  False

Question 3

It is possible for the economy to be producing at a point that lies beyond its institutional production possibilities frontier (PPF),but not its physical PPF.

Accepted Answer

A) True 
 B)False  True

Question 4

Exhibit 9-7
  
-Refer to Exhibit 9-7. Which point is representative of the economy experiencing labor market surpluses?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E

Question 5

Suppose the economy is self-regulating,the price level is 120,the quantity demanded of Real GDP and the quantity supplied of Real GDP in the short run both equal $5.7 trillion,and the quantity supplied of Real GDP in the long run is $5.2 trillion. Given all of this information,we can conclude that the economy ____________ in short run equilibrium,and that the price level in long run equilibrium will be _____________ than 120.

Accepted Answer

A)  is not; less 
B)  is; more 
C)  is; less 
D)  is not; more 
A)  is not; less 
B)  is; more 
C)  is; less 
D)  is not; more

Question 6

In a self-regulating economy,inflationary and recessionary gaps produce shifts of the

Accepted Answer

A)  AD curve that maintain the short-run equilibrium point. 
B)  AD curve that move the economy to a long-run equilibrium point. 
C)  SRAS curve that maintain the short-run equilibrium point. 
D)  SRAS curve that move the economy to a long-run equilibrium point. 
A)  AD curve that maintain the short-run equilibrium point. 
B)  AD curve that move the economy to a long-run equilibrium point. 
C)  SRAS curve that maintain the short-run equilibrium point. 
D)  SRAS curve that move the economy to a long-run equilibrium point.

Question 7

According to classical economists,the relationship between the amount of funds households plan to save and the interest rate is

Accepted Answer

A)  indirect. 
B)  inverse. 
C)  direct. 
D)  independent. 
A)  indirect. 
B)  inverse. 
C)  direct. 
D)  independent.

Question 8

If the economy is in a recessionary gap,

Accepted Answer

A)  Real GDP is greater than Natural Real GDP. 
B)  Real GDP is equal to Natural Real GDP. 
C)  Real GDP is less than Natural Real GDP. 
D)  the (actual) unemployment rate is less than the natural unemployment rate. 
E)  a and d 
A)  Real GDP is greater than Natural Real GDP. 
B)  Real GDP is equal to Natural Real GDP. 
C)  Real GDP is less than Natural Real GDP. 
D)  the (actual) unemployment rate is less than the natural unemployment rate. 
E)  a and d

Question 9

Exhibit 9-7
  
-Refer to Exhibit 9-7. Which point is representative of the economy in an inflationary gap?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  E 
A)  A 
B)  B 
C)  C 
D)  E

Question 10

When the economy is in a recessionary gap,the labor market is experiencing a _____________. In a self-regulating economy,wage rates will then ___________ and the ______________ curve will shift __________________.

Accepted Answer

A)  shortage; rise; AD; rightward 
B)  shortage; fall; SRAS; leftward 
C)  surplus; rise; AD; rightward 
D)  shortage; fall; SRAS; rightward 
E)  surplus; fall; SRAS; rightward 
A)  shortage; rise; AD; rightward 
B)  shortage; fall; SRAS; leftward 
C)  surplus; rise; AD; rightward 
D)  shortage; fall; SRAS; rightward 
E)  surplus; fall; SRAS; rightward

Question 11

A recessionary gap exists when AD and SRAS

Accepted Answer

A)  fail to intersect. 
B)  intersect to the right of Natural Real GDP. 
C)  intersect to the left of Natural Real GDP. 
D)  both have a positive slope. 
A)  fail to intersect. 
B)  intersect to the right of Natural Real GDP. 
C)  intersect to the left of Natural Real GDP. 
D)  both have a positive slope.

Question 12

Exhibit 9-4
  
-Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P2.If something happens that shifts the AD curve to the AD1 position,the economy will eventually settle down at a long-run equilibrium point of __________.

Accepted Answer

A)  P5, Q3. 
B)  P4, Q4. 
C)  P3, Q3. 
D)  P3, Q5. 
E)  P4, Q2. 
A)  P5, Q3. 
B)  P4, Q4. 
C)  P3, Q3. 
D)  P3, Q5. 
E)  P4, Q2.

Question 13

If the structural unemployment rate is 3 percent,the frictional unemployment rate is 2 percent,and the current unemployment rate is 6 percent,then the economy is in a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 14

When the current state of the economy is such that Real GDP is equal to Natural Real GDP,the economy is in ____________________ . In this situation,the (actual)unemployment rate is ___________ the natural unemployment rate,and there is ________________ in the labor market.

Accepted Answer

A)  long-run equilibrium; equal to; equilibrium 
B)  inflationary; less than; a shortage 
C)  long-run equilibrium; greater than; equilibrium 
D)  recessionary; greater than; a surplus 
E)  recessionary; less than; equilibrium 
A)  long-run equilibrium; equal to; equilibrium 
B)  inflationary; less than; a shortage 
C)  long-run equilibrium; greater than; equilibrium 
D)  recessionary; greater than; a surplus 
E)  recessionary; less than; equilibrium

Question 15

The classical economists felt that there would be no general overproduction of goods because of

Accepted Answer

A)  wage-price flexibility. 
B)  the law of diminishing utility. 
C)  the law of comparative advantage. 
D)  contestable markets. 
A)  wage-price flexibility. 
B)  the law of diminishing utility. 
C)  the law of comparative advantage. 
D)  contestable markets.

Question 16

In order for Say's law to hold in a money economy,

Accepted Answer

A)  there must be more than four goods. 
B)  funds saved must give rise to an equal amount of funds earned. 
C)  funds saved must give rise to an equal amount of funds invested. 
D)  none of the above 
A)  there must be more than four goods. 
B)  funds saved must give rise to an equal amount of funds earned. 
C)  funds saved must give rise to an equal amount of funds invested. 
D)  none of the above

Question 17

Exhibit 9-3
  
-Refer to Exhibit 9-3.The economy is in long-run equilibrium at point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
E)  E. 
A)  A. 
B)  B. 
C)  C. 
D)  D. 
E)  E.

Question 18

Exhibit 9-5
  
-Refer to Exhibit 9-5.Point A on graph (2)corresponds to which point(s)on graph (1)?

Accepted Answer

A)  I or J 
B)  K 
C)  L or M 
D)  I or L 
E)  J or M 
A)  I or J 
B)  K 
C)  L or M 
D)  I or L 
E)  J or M

Question 19

If Real GDP is less than Natural Real GDP,the economy is in

Accepted Answer

A)  an inflationary gap. 
B)  a recessionary gap. 
C)  an unemployment gap. 
D)  a real gap. 
A)  an inflationary gap. 
B)  a recessionary gap. 
C)  an unemployment gap. 
D)  a real gap.

Question 20

Say's law says

Accepted Answer

A)  demand creates its own supply. 
B)  the more supply there is, the lower prices are. 
C)  supply creates supply. 
D)  supply creates its own demand. 
E)  none of the above 
A)  demand creates its own supply. 
B)  the more supply there is, the lower prices are. 
C)  supply creates supply. 
D)  supply creates its own demand. 
E)  none of the above

Exam 9: Classical Macroeconomics and the Self Regulating Economy

According to classical economists,the relationship between the amount of funds firms invest and the interest rate is

If the economy is in long-run equilibrium,the actual unemployment rate is less than the natural unemployment rate.

It is possible for the economy to be producing at a point that lies beyond its institutional production possibilities frontier (PPF),but not its physical PPF.

Exhibit 9-7 -Refer to Exhibit 9-7. Which point is representative of the economy experiencing labor market surpluses?

In a self-regulating economy,inflationary and recessionary gaps produce shifts of the

According to classical economists,the relationship between the amount of funds households plan to save and the interest rate is

If the economy is in a recessionary gap,

Exhibit 9-7 -Refer to Exhibit 9-7. Which point is representative of the economy in an inflationary gap?

When the economy is in a recessionary gap,the labor market is experiencing a _____________. In a self-regulating economy,wage rates will then ___________ and the ______________ curve will shift __________________.

A recessionary gap exists when AD and SRAS

Exhibit 9-4 -Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P2.If something happens that shifts the AD curve to the AD1 position,the economy will eventually settle down at a long-run equilibrium point of __________.

If the structural unemployment rate is 3 percent,the frictional unemployment rate is 2 percent,and the current unemployment rate is 6 percent,then the economy is in a recessionary gap.

When the current state of the economy is such that Real GDP is equal to Natural Real GDP,the economy is in ____________________ . In this situation,the (actual)unemployment rate is ___________ the natural unemployment rate,and there is ________________ in the labor market.

The classical economists felt that there would be no general overproduction of goods because of

In order for Say's law to hold in a money economy,

Exhibit 9-3 -Refer to Exhibit 9-3.The economy is in long-run equilibrium at point

Exhibit 9-5 -Refer to Exhibit 9-5.Point A on graph (2)corresponds to which point(s)on graph (1)?

If Real GDP is less than Natural Real GDP,the economy is in

Say's law says

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

When the economy is in a recessionary gap,the labor market is experiencing a _______. In a self-regulating economy,wage rates will then _ and the curve will shift ________.

When the current state of the economy is such that Real GDP is equal to Natural Real GDP,the economy is in ______________ . In this situation,the (actual)unemployment rate is _ the natural unemployment rate,and there is ____________ in the labor market.