Question 1

In a self-regulating economy,a recessionary gap will be eliminated by falling wages which will shift the SRAS curve to the right.

Accepted Answer

A) True 
 B)False

Question 2

Say's law states "demand creates its own supply".

Accepted Answer

A) True 
 B)False

Question 3

For saving to increase,consumption must decrease,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 4

The economy can operate

Accepted Answer

A)  beyond its institutional PPF but not beyond its physical PPF. 
B)  on both its institutional PPF and its physical PPF, but not at the same time. 
C)  under its physical PPF but not under its institutional PPF. 
D)  a and b 
E)  a, b, and c 
A)  beyond its institutional PPF but not beyond its physical PPF. 
B)  on both its institutional PPF and its physical PPF, but not at the same time. 
C)  under its physical PPF but not under its institutional PPF. 
D)  a and b 
E)  a, b, and c

Question 5

The natural rate of unemployment exists at

Accepted Answer

A)  some point within the interior of the PPF but outside the limits of the institutional PPF. 
B)  some point within the interior of the physical PPF, but we cannot locate it with more accuracy. 
C)  some point within the interior of the institutional PPF, but we cannot locate it with more accuracy. 
D)  every point on the institutional PPF. 
E)  every point on the physical PPF. 
A)  some point within the interior of the PPF but outside the limits of the institutional PPF. 
B)  some point within the interior of the physical PPF, but we cannot locate it with more accuracy. 
C)  some point within the interior of the institutional PPF, but we cannot locate it with more accuracy. 
D)  every point on the institutional PPF. 
E)  every point on the physical PPF.

Question 6

If the economy is self-regulating,explain the correct sequence of events that occurs once the economy is in a recessionary gap to move the economy to long-run equilibrium.

Accepted Answer

The actual unemployment rate is greater

Question 7

The more institutional constraints that exist in a particular society,

Accepted Answer

A)  the closer the institutional PPF will lie to the physical PPF. 
B)  the farther out from the origin the institutional PPF will lie. 
C)  the closer to the origin the institutional PPF will lie. 
D)  the closer to the origin the institutional PPF will lie and the farther out from the origin the physical PPF will lie. 
A)  the closer the institutional PPF will lie to the physical PPF. 
B)  the farther out from the origin the institutional PPF will lie. 
C)  the closer to the origin the institutional PPF will lie. 
D)  the closer to the origin the institutional PPF will lie and the farther out from the origin the physical PPF will lie.

Question 8

Using the aggregate demand and aggregate supply (AD-SRAS)framework,explain how a large-scale natural disaster would be expected to impact the economy. Discuss how an economist who believes the economy is self-regulating would view the longer term impact of such a disaster,and whether they would advocate the need for government intervention.

Accepted Answer

A large-scale natural disaster represent

Question 9

When the economy is in a recessionary gap,the labor market is experiencing a surplus.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 9-5
  
-Refer to Exhibit 9-5.Point G 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 11

Exhibit 9-5
  
-Refer to Exhibit 9-5.Point B 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 12

According to Say's law,

Accepted Answer

A)  if there is demand for a good, someone will supply it. 
B)  production creates demand sufficient to purchase all goods and services produced. 
C)  supply and demand work together to determine price. 
D)  trading takes longer in a barter economy than in a money economy. 
E)  none of the above 
A)  if there is demand for a good, someone will supply it. 
B)  production creates demand sufficient to purchase all goods and services produced. 
C)  supply and demand work together to determine price. 
D)  trading takes longer in a barter economy than in a money economy. 
E)  none of the above

Question 13

According to classical economists,if interest rates are flexible,

Accepted Answer

A)  saving will equal investment. 
B)  saving may be greater than investment. 
C)  saving may be less than investment. 
D)  any of the above 
A)  saving will equal investment. 
B)  saving may be greater than investment. 
C)  saving may be less than investment. 
D)  any of the above

Question 14

The institutional production possibilities frontier illustrates the different combinations of goods that society can obtain given

Accepted Answer

A)  the constraints of finite resources and the current state of technology. 
B)  the price level. 
C)  its institutional constraints. 
D)  the natural rate of unemployment. 
E)  the constraints of finite resources and the current state of technology and institutional constraints. 
A)  the constraints of finite resources and the current state of technology. 
B)  the price level. 
C)  its institutional constraints. 
D)  the natural rate of unemployment. 
E)  the constraints of finite resources and the current state of technology and institutional constraints.

Question 15

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

Accepted Answer

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

Question 16

Suppose the economy's short-run equilibrium point is to the right of the Natural Real GDP.Which of the following is true?

Accepted Answer

A)  The economy is in an inflationary gap. 
B)  The economy is in a recessionary gap. 
C)  The economy is in long-run equilibrium. 
D)  This situation is actually impossible. 
A)  The economy is in an inflationary gap. 
B)  The economy is in a recessionary gap. 
C)  The economy is in long-run equilibrium. 
D)  This situation is actually impossible.

Question 17

Classical economics refers to an era in the history of economic thought that stretched from the late 1600s to the mid-1800s.

Accepted Answer

A) True 
 B)False

Question 18

If Real GDP is greater than Natural Real GDP,the economy is in a(n)

Accepted Answer

A)  frictional gap. 
B)  structural gap. 
C)  recessionary gap. 
D)  inflationary gap. 
A)  frictional gap. 
B)  structural gap. 
C)  recessionary gap. 
D)  inflationary gap.

Question 19

Exhibit 9-2
  
-Refer to Exhibit 9-2.The economy is currently producing Q1.At this level of Real GDP,the economy is in a(n)

Accepted Answer

A)  inflationary gap. 
B)  recessionary gap. 
C)  unemployment gap. 
D)  high Real GDP gap. 
E)  none of the above 
A)  inflationary gap. 
B)  recessionary gap. 
C)  unemployment gap. 
D)  high Real GDP gap. 
E)  none of the above

Question 20

Exhibit 9-5
  
-Refer to Exhibit 9-5.Picture an AD curve intersecting an SRAS curve at Point K on graph (1). Which point(s)would this correspond to on graph (2)?

Accepted Answer

A)  A or B 
B)  C 
C)  D or E 
D)  F 
E)  G 
A)  A or B 
B)  C 
C)  D or E 
D)  F 
E)  G

Exam 9: Classical Macroeconomics and the Self Regulating Economy

In a self-regulating economy,a recessionary gap will be eliminated by falling wages which will shift the SRAS curve to the right.

Say's law states "demand creates its own supply".

For saving to increase,consumption must decrease,ceteris paribus.

The economy can operate

The natural rate of unemployment exists at

If the economy is self-regulating,explain the correct sequence of events that occurs once the economy is in a recessionary gap to move the economy to long-run equilibrium.

The more institutional constraints that exist in a particular society,

When the economy is in a recessionary gap,the labor market is experiencing a surplus.

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

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

According to Say's law,

According to classical economists,if interest rates are flexible,

The institutional production possibilities frontier illustrates the different combinations of goods that society can obtain given

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

Suppose the economy's short-run equilibrium point is to the right of the Natural Real GDP.Which of the following is true?

Classical economics refers to an era in the history of economic thought that stretched from the late 1600s to the mid-1800s.

If Real GDP is greater than Natural Real GDP,the economy is in a(n)

Exhibit 9-2 -Refer to Exhibit 9-2.The economy is currently producing Q1.At this level of Real GDP,the economy is in a(n)

Exhibit 9-5 -Refer to Exhibit 9-5.Picture an AD curve intersecting an SRAS curve at Point K on graph (1). Which point(s)would this correspond to on graph (2)?

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

Exhibit 9-2 -Refer to Exhibit 9-2.The economy is currently producing Q_1.At this level of Real GDP,the economy is in a(n)