Question 1

The physical production possibilities frontier illustrates the different combinations of goods that society can produce 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 2

If the economy is currently in a recessionary gap,

Accepted Answer

A)  all economists will argue that the economy can remove the gap itself. 
B)  some economists will argue that the economy can remove the gap itself. 
C)  no economist will argue that the economy can remove the gap itself. 
D)  all economists will argue that over time the recessionary gap will worsen. 
A)  all economists will argue that the economy can remove the gap itself. 
B)  some economists will argue that the economy can remove the gap itself. 
C)  no economist will argue that the economy can remove the gap itself. 
D)  all economists will argue that over time the recessionary gap will worsen.

Question 3

If the economy is self-regulating,then it follows that

Accepted Answer

A)  recessionary and inflationary gaps are temporary economic states. 
B)  wages will fall when the economy is in a recessionary gap. 
C)  wages will rise when the economy is in an inflationary gap. 
D)  the economy is always in long-run equilibrium. 
E)  a, b and c 
A)  recessionary and inflationary gaps are temporary economic states. 
B)  wages will fall when the economy is in a recessionary gap. 
C)  wages will rise when the economy is in an inflationary gap. 
D)  the economy is always in long-run equilibrium. 
E)  a, b and c

Question 4

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

Accepted Answer

A)  recessionary; greater; shortage 
B)  inflationary; less; shortage 
C)  inflationary; greater; surplus 
D)  recessionary; greater; surplus 
E)  recessionary; less; shortage 
A)  recessionary; greater; shortage 
B)  inflationary; less; shortage 
C)  inflationary; greater; surplus 
D)  recessionary; greater; surplus 
E)  recessionary; less; shortage

Question 5

Classical macroeconomists assert that "saving" is the same as "not spending at all".

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 9-1
  
-Refer to Exhibit 9-1.The economy is currently producing Q1.If an economist believes the economy can move itself without government intervention to QN,then he believes that the

Accepted Answer

A)  LRAS curve will shift leftward until it intersects the SRAS and AD curves at Q1. 
B)  AD curve will shift rightward and intersect the SRAS curve at point B. 
C)  SRAS curve will shift rightward and intersect the AD curve at point A. 
D)  economy will likely stay "stuck" in short-run equilibrium. 
A)  LRAS curve will shift leftward until it intersects the SRAS and AD curves at Q1. 
B)  AD curve will shift rightward and intersect the SRAS curve at point B. 
C)  SRAS curve will shift rightward and intersect the AD curve at point A. 
D)  economy will likely stay "stuck" in short-run equilibrium.

Question 7

The classical economists felt that wages and prices were flexible in

Accepted Answer

A)  neither the upward direction nor the downward direction. 
B)  the upward direction but not in the downward direction. 
C)  the downward direction but not in the upward direction. 
D)  both the upward and downward directions. 
A)  neither the upward direction nor the downward direction. 
B)  the upward direction but not in the downward direction. 
C)  the downward direction but not in the upward direction. 
D)  both the upward and downward directions.

Question 8

Describe the difference between business-cycle macroeconomics and economic-growth macroeconomics.

Accepted Answer

Business-cycle macroeconomics involves c

Question 9

A laissez-faire macroeconomic policy,based on a __________ in self regulating properties of the economy,implies __________ by the government.

Accepted Answer

A)  belief, active policymaking 
B)  belief, noninterference 
C)  disbelief, active policymaking 
D)  disbelief, noninterference 
A)  belief, active policymaking 
B)  belief, noninterference 
C)  disbelief, active policymaking 
D)  disbelief, noninterference

Question 10

Exhibit 9-4
  
-Refer to Exhibit 9-4.Assume the economy is currently in long-run equilibrium with the price level equal to P3.If foreigners begin to buy more U.S.goods,the economy will,in the short run,move to which of the following equilibrium combinations of price level and Real GDP?

Accepted Answer

A)  P2, Q4. 
B)  P3, Q3. 
C)  P4, Q2. 
D)  P4, Q4. 
E)  P5, Q3. 
A)  P2, Q4. 
B)  P3, Q3. 
C)  P4, Q2. 
D)  P4, Q4. 
E)  P5, Q3.

Question 11

Which of the following is most nearly consistent with Say's law?

Accepted Answer

A)  When a person produces one good, he or she plans to demand other goods. 
B)  When a person produces a good, he or she plans to sell it. 
C)  When a person buys a good, he or she plans to pay for it with money. 
D)  When a person goes to work, he or she plans to produce. 
A)  When a person produces one good, he or she plans to demand other goods. 
B)  When a person produces a good, he or she plans to sell it. 
C)  When a person buys a good, he or she plans to pay for it with money. 
D)  When a person goes to work, he or she plans to produce.

Question 12

The classical economists thought that wages,prices,and interest rates were flexible in both the upward and the downward direction.

Accepted Answer

A) True 
 B)False

Question 13

When the economy is in an inflationary 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; SRAS; leftward 
B)  shortage; fall; SRAS; leftward 
C)  surplus; rise; AD; rightward 
D)  shortage; fall; AD; rightward 
E)  surplus; fall; SRAS; rightward 
A)  shortage; rise; SRAS; leftward 
B)  shortage; fall; SRAS; leftward 
C)  surplus; rise; AD; rightward 
D)  shortage; fall; AD; rightward 
E)  surplus; fall; SRAS; rightward

Question 14

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 P3.After an initial increase in U.S.exports,the long-run equilibrium will be brought about by a shift from

Accepted Answer

A)  AD3 to AD1. 
B)  SRAS1 to SRAS2. 
C)  SRAS2 to SRAS1. 
D)  AD3 to AD2. 
E)  none of the above 
A)  AD3 to AD1. 
B)  SRAS1 to SRAS2. 
C)  SRAS2 to SRAS1. 
D)  AD3 to AD2. 
E)  none of the above

Question 15

Exhibit 9-8
Suppose that at a given price level the following values exist in a hypothetical economy:
Consumption = $7,000 billion
Investment = $1,900 billion
Government Purchases = $1,700 billion
Exports = $300 billion
Imports = $300 billion
Assume that the level of total expenditures is equal to the value of goods and services that suppliers want to sell.
-Refer to Exhibit 9-8. If saving increases by $500 billion,the new level of consumption will equal ______________. According to classical economists investment would _______________ and total expenditures would ________________________.

Accepted Answer

A)  $6,500 billion; then decrease by $500 billion; fall by $500 billion 
B)  $6,500 billion; then increase by $500 billion; fall by $500 billion 
C)  $7,500 billion; remain constant; fall by $500 billion 
D)  $6,500 billion; then increase by $500 billion; remain constant 
A)  $6,500 billion; then decrease by $500 billion; fall by $500 billion 
B)  $6,500 billion; then increase by $500 billion; fall by $500 billion 
C)  $7,500 billion; remain constant; fall by $500 billion 
D)  $6,500 billion; then increase by $500 billion; remain constant

Question 16

Which of the following is consistent with the classical position on wages and prices?

Accepted Answer

A)  Wages and prices are sticky in the downward direction. 
B)  Wages are sticky in the downward direction, but prices are flexible. 
C)  Wages and prices are flexible. 
D)  Prices are sticky in the downward direction, but wages are flexible. 
A)  Wages and prices are sticky in the downward direction. 
B)  Wages are sticky in the downward direction, but prices are flexible. 
C)  Wages and prices are flexible. 
D)  Prices are sticky in the downward direction, but wages are flexible.

Question 17

Exhibit 9-3
  
-Refer to Exhibit 9-3.If the economy is in equilibrium at point B,

Accepted Answer

A)  the (actual) unemployment rate is less than the natural unemployment rate. 
B)  the (actual) unemployment rate is equal to the natural unemployment rate. 
C)  the (actual) unemployment rate is greater than the natural unemployment rate. 
D)  the relationship between the (actual) unemployment rate and the natural unemployment rate cannot be determined from the available information. 
A)  the (actual) unemployment rate is less than the natural unemployment rate. 
B)  the (actual) unemployment rate is equal to the natural unemployment rate. 
C)  the (actual) unemployment rate is greater than the natural unemployment rate. 
D)  the relationship between the (actual) unemployment rate and the natural unemployment rate cannot be determined from the available information.

Question 18

If the economy is currently in a recessionary gap,the SRAS curve intersects the AD curve to the left of Natural Real GDP.

Accepted Answer

A) True 
 B)False

Question 19

If the natural unemployment rate is 5.5 percent,then the economy is in a recessionary gap when the actual unemployment rate is

Accepted Answer

A)  more than 5.5 percent. 
B)  between 0 and 5.5 percent. 
C)  0 percent. 
D)  5.5 percent. 
A)  more than 5.5 percent. 
B)  between 0 and 5.5 percent. 
C)  0 percent. 
D)  5.5 percent.

Question 20

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

Accepted Answer

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

Exam 9: Classical Macroeconomics and the Self Regulating Economy

The physical production possibilities frontier illustrates the different combinations of goods that society can produce given

If the economy is currently in a recessionary gap,

If the economy is self-regulating,then it follows that

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

Classical macroeconomists assert that "saving" is the same as "not spending at all".

Exhibit 9-1 -Refer to Exhibit 9-1.The economy is currently producing Q1.If an economist believes the economy can move itself without government intervention to QN,then he believes that the

The classical economists felt that wages and prices were flexible in

Describe the difference between business-cycle macroeconomics and economic-growth macroeconomics.

A laissez-faire macroeconomic policy,based on a __________ in self regulating properties of the economy,implies __________ by the government.

Exhibit 9-4 -Refer to Exhibit 9-4.Assume the economy is currently in long-run equilibrium with the price level equal to P3.If foreigners begin to buy more U.S.goods,the economy will,in the short run,move to which of the following equilibrium combinations of price level and Real GDP?

Which of the following is most nearly consistent with Say's law?

The classical economists thought that wages,prices,and interest rates were flexible in both the upward and the downward direction.

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

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 P3.After an initial increase in U.S.exports,the long-run equilibrium will be brought about by a shift from

Which of the following is consistent with the classical position on wages and prices?

Exhibit 9-3 -Refer to Exhibit 9-3.If the economy is in equilibrium at point B,

If the economy is currently in a recessionary gap,the SRAS curve intersects the AD curve to the left of Natural Real GDP.

If the natural unemployment rate is 5.5 percent,then the economy is in a recessionary gap when the actual unemployment rate is

Exhibit 9-5 -Refer to Exhibit 9-5.Picture an AD curve intersecting an SRAS curve at Point M 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

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

Exhibit 9-1 -Refer to Exhibit 9-1.The economy is currently producing Q₁.If an economist believes the economy can move itself without government intervention to Q_N,then he believes that the

A laissez-faire macroeconomic policy,based on a in self regulating properties of the economy,implies by the government.

Exhibit 9-4 -Refer to Exhibit 9-4.Assume the economy is currently in long-run equilibrium with the price level equal to P₃.If foreigners begin to buy more U.S.goods,the economy will,in the short run,move to which of the following equilibrium combinations of price level and Real GDP?

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

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 P₃.After an initial increase in U.S.exports,the long-run equilibrium will be brought about by a shift from