Question 1

Exhibit 9-6
  
-Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,it follows that

Accepted Answer

A)  there is a surplus of labor in the labor market. 
B)  the economy is currently on its institutional PPF. 
C)  the economy is currently in an inflationary gap. 
D)  the labor market is in equilibrium. 
E)  the actual unemployment rate is below the natural unemployment rate. 
A)  there is a surplus of labor in the labor market. 
B)  the economy is currently on its institutional PPF. 
C)  the economy is currently in an inflationary gap. 
D)  the labor market is in equilibrium. 
E)  the actual unemployment rate is below the natural unemployment rate.

Question 2

The economy is currently operating at a point on its physical production possibilities frontier (physical PPF).It is

Accepted Answer

A)  producing Natural Real GDP and operating below the natural unemployment rate. 
B)  producing more than Natural Real GDP and operating above the natural unemployment rate. 
C)  producing more than Natural Real GDP and operating below the natural unemployment rate. 
D)  in long-run equilibrium. 
A)  producing Natural Real GDP and operating below the natural unemployment rate. 
B)  producing more than Natural Real GDP and operating above the natural unemployment rate. 
C)  producing more than Natural Real GDP and operating below the natural unemployment rate. 
D)  in long-run equilibrium.

Question 3

Exhibit 9-6
  
-Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,the real balance effect is operational and relevant between points

Accepted Answer

A)  3 and 4. 
B)  1 and 2. 
C)  1 and 4. 
D)  1 and 3. 
E)  2 and 3. 
A)  3 and 4. 
B)  1 and 2. 
C)  1 and 4. 
D)  1 and 3. 
E)  2 and 3.

Question 4

When consumers start to spend less and save more,classical macroeconomists believe that interest rates will then ______________ resulting in a(n)________________ in investment.

Accepted Answer

A)  rise; increase 
B)  fall; increase 
C)  fall; decrease 
D)  rise; decrease 
A)  rise; increase 
B)  fall; increase 
C)  fall; decrease 
D)  rise; decrease

Question 5

If the SRAS curve intersects the AD curve to the left of Natural Real GDP,the economy is

Accepted Answer

A)  in a recessionary gap. 
B)  at Natural Real GDP. 
C)  in an inflationary gap. 
D)  at full-employment Real GDP. 
A)  in a recessionary gap. 
B)  at Natural Real GDP. 
C)  in an inflationary gap. 
D)  at full-employment Real GDP.

Question 6

In the classical view of the credit market,a rise in saving produces a rise in investment via a

Accepted Answer

A)  rising interest rate. 
B)  falling interest rate. 
C)  rising price level. 
D)  falling price level. 
A)  rising interest rate. 
B)  falling interest rate. 
C)  rising price level. 
D)  falling price level.

Question 7

The long-run aggregate supply (LRAS)curve is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  positively sloped. 
D)  negatively sloped. 
A)  horizontal. 
B)  vertical. 
C)  positively sloped. 
D)  negatively sloped.

Question 8

If the economy is self-regulating and in a recessionary gap,

Accepted Answer

A)  wages and prices will fall. 
B)  wages will fall, but prices will rise. 
C)  neither wages nor prices will change. 
D)  wages will rise, but prices will fall. 
E)  wages and prices will rise. 
A)  wages and prices will fall. 
B)  wages will fall, but prices will rise. 
C)  neither wages nor prices will change. 
D)  wages will rise, but prices will fall. 
E)  wages and prices will rise.

Question 9

According to Say's law,in a money economy a reduction in consumption spending causes a __________ shift of the saving curve and therefore a __________ in the interest rate.

Accepted Answer

A)  leftward; rise 
B)  leftward; fall 
C)  rightward; rise 
D)  rightward; fall 
A)  leftward; rise 
B)  leftward; fall 
C)  rightward; rise 
D)  rightward; fall

Question 10

Which of the following equations is correct?

Accepted Answer

A)  Saving = Disposable income + Consumption 
B)  Saving = Disposable income x Consumption 
C)  Disposable income = Consumption - Saving 
D)  Saving = Disposable income - Consumption 
A)  Saving = Disposable income + Consumption 
B)  Saving = Disposable income x Consumption 
C)  Disposable income = Consumption - Saving 
D)  Saving = Disposable income - Consumption

Question 11

Which of the following statements is true?

Accepted Answer

A)  The economy can operate outside (or beyond) its institutional PPF and its physical PPF, but only for a short while. 
B)  The economy can operate outside its physical PPF, if only for a short while, but can never operate outside its institutional PPF. 
C)  The economy can operate outside its institutional PPF, if only for a short while, but can never operate outside its physical PPF. 
D)  The economy can never operate outside its institutional PPF or its physical PPF, even for a short while. 
E)  none of the above 
A)  The economy can operate outside (or beyond) its institutional PPF and its physical PPF, but only for a short while. 
B)  The economy can operate outside its physical PPF, if only for a short while, but can never operate outside its institutional PPF. 
C)  The economy can operate outside its institutional PPF, if only for a short while, but can never operate outside its physical PPF. 
D)  The economy can never operate outside its institutional PPF or its physical PPF, even for a short while. 
E)  none of the above

Question 12

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

Question 13

According to classical economists,the economy

Accepted Answer

A)  always operates at a point below its institutional production possibilities frontier (PPF). 
B)  always operates close to or on its institutional PPF. 
C)  seldom operates close to or on its institutional PPF. 
D)  never operates close to or on its institutional PPF. 
A)  always operates at a point below its institutional production possibilities frontier (PPF). 
B)  always operates close to or on its institutional PPF. 
C)  seldom operates close to or on its institutional PPF. 
D)  never operates close to or on its institutional PPF.

Question 14

All economists agree that the economy is self-regulating.

Accepted Answer

A) True 
 B)False

Question 15

If the natural unemployment rate is 5.5 percent,then the economy is at full employment 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. 
E)  none of the above 
A)  more than 5.5 percent. 
B)  between 0 and 5.5 percent. 
C)  0 percent. 
D)  5.5 percent. 
E)  none of the above

Question 16

Suppose the economy is self-regulating,the price level is 150,the quantity demanded of Real GDP and the quantity supplied of Real GDP in the short run both equal $4.3 trillion,and the quantity supplied of Real GDP in the long run is $4.1 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 150.

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 17

If the economy is self-regulating and in an inflationary gap,

Accepted Answer

A)  wages and prices will fall. 
B)  wages will rise, but prices will fall. 
C)  wages and prices will rise. 
D)  wages will fall, but prices will rise. 
E)  neither wages nor prices will change. 
A)  wages and prices will fall. 
B)  wages will rise, but prices will fall. 
C)  wages and prices will rise. 
D)  wages will fall, but prices will rise. 
E)  neither wages nor prices will change.

Question 18

If the economy is self-regulating and current Real GDP is less than Natural Real GDP,the economy is operating __________ the natural unemployment rate and wages will __________.

Accepted Answer

A)  below; soon rise 
B)  above; soon rise 
C)  below; soon fall 
D)  above; remain unchanged 
E)  none of the above 
A)  below; soon rise 
B)  above; soon rise 
C)  below; soon fall 
D)  above; remain unchanged 
E)  none of the above

Question 19

When there is an inflationary gap,(actual)Real GDP is __________ Natural Real GDP,and the (actual)unemployment rate is __________ the natural rate of unemployment.

Accepted Answer

A)  greater than; less than 
B)  greater than; greater than 
C)  less than; greater than 
D)  less than; less than 
E)  less than; equal to 
A)  greater than; less than 
B)  greater than; greater than 
C)  less than; greater than 
D)  less than; less than 
E)  less than; equal to

Question 20

If the economy is operating at a point beyond its institutional production possibilities frontier (institutional PPF),then the economy is

Accepted Answer

A)  producing Natural Real GDP and operating at the natural unemployment rate. 
B)  producing less than Natural Real GDP and operating below the natural unemployment rate. 
C)  producing more than Natural Real GDP and operating above the natural unemployment rate. 
D)  producing more than Natural Real GDP and operating below the natural unemployment rate. 
E)  none of the above 
A)  producing Natural Real GDP and operating at the natural unemployment rate. 
B)  producing less than Natural Real GDP and operating below the natural unemployment rate. 
C)  producing more than Natural Real GDP and operating above the natural unemployment rate. 
D)  producing more than Natural Real GDP and operating below the natural unemployment rate. 
E)  none of the above

Exam 9: Classical Macroeconomics and the Self Regulating Economy

Exhibit 9-6 -Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,it follows that

The economy is currently operating at a point on its physical production possibilities frontier (physical PPF).It is

Exhibit 9-6 -Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,the real balance effect is operational and relevant between points

When consumers start to spend less and save more,classical macroeconomists believe that interest rates will then ______________ resulting in a(n)________________ in investment.

If the SRAS curve intersects the AD curve to the left of Natural Real GDP,the economy is

In the classical view of the credit market,a rise in saving produces a rise in investment via a

The long-run aggregate supply (LRAS)curve is

If the economy is self-regulating and in a recessionary gap,

According to Say's law,in a money economy a reduction in consumption spending causes a __________ shift of the saving curve and therefore a __________ in the interest rate.

Which of the following equations is correct?

Which of the following statements is true?

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

According to classical economists,the economy

All economists agree that the economy is self-regulating.

If the natural unemployment rate is 5.5 percent,then the economy is at full employment when the actual unemployment rate is

If the economy is self-regulating and in an inflationary gap,

If the economy is self-regulating and current Real GDP is less than Natural Real GDP,the economy is operating __________ the natural unemployment rate and wages will __________.

When there is an inflationary gap,(actual)Real GDP is __________ Natural Real GDP,and the (actual)unemployment rate is __________ the natural rate of unemployment.

If the economy is operating at a point beyond its institutional production possibilities frontier (institutional PPF),then the economy is

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 consumers start to spend less and save more,classical macroeconomists believe that interest rates will then resulting in a(n)__ in investment.

According to Say's law,in a money economy a reduction in consumption spending causes a shift of the saving curve and therefore a in the interest rate.

If the economy is self-regulating and current Real GDP is less than Natural Real GDP,the economy is operating the natural unemployment rate and wages will .

When there is an inflationary gap,(actual)Real GDP is Natural Real GDP,and the (actual)unemployment rate is the natural rate of unemployment.