Question 1

Exhibit 9-5
  
-Refer to Exhibit 9-5.Point C 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 2

When the economy is at its full employment Real GDP,the unemployment rate is equal to

Accepted Answer

A)  zero. 
B)  the natural unemployment rate. 
C)  the frictional unemployment rate. 
D)  the structural unemployment rate. 
A)  zero. 
B)  the natural unemployment rate. 
C)  the frictional unemployment rate. 
D)  the structural unemployment rate.

Question 3

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

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 4

A person who believes the economy is self-regulating also believes that

Accepted Answer

A)  when there is a surplus in the labor market, the wage rate falls, and when there is a shortage in the labor market, the wage rate rises. 
B)  it is better if the economy is in an inflationary gap than a recessionary gap. 
C)  prices are flexible but wages are not. 
D)  the economy is always in long-run equilibrium. 
E)  the real balance effect does not operate in a recessionary gap. 
A)  when there is a surplus in the labor market, the wage rate falls, and when there is a shortage in the labor market, the wage rate rises. 
B)  it is better if the economy is in an inflationary gap than a recessionary gap. 
C)  prices are flexible but wages are not. 
D)  the economy is always in long-run equilibrium. 
E)  the real balance effect does not operate in a recessionary gap.

Question 5

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

Accepted Answer

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

Question 6

Exhibit 9-2
  
-Refer to Exhibit 9-2.The economy is currently producing Q1.At this level of Real GDP,the economy is experiencing

Accepted Answer

A)  a shortage in the labor market. 
B)  a surplus in the labor market. 
C)  neither a shortage nor a surplus in the labor market. 
D)  all of the above are equally likely 
A)  a shortage in the labor market. 
B)  a surplus in the labor market. 
C)  neither a shortage nor a surplus in the labor market. 
D)  all of the above are equally likely

Question 7

A natural disaster,such as the 2011 Japanese earthquake and tsunami,shifts the ___________ curve _____________________. According to economists who believe that the economy is self-regulating,the result will be that the economy _____________be able to find its way back to Natural Real GDP without government intervention.

Accepted Answer

A)  SRAS; rightward; will 
B)  SRAS; leftward; will not 
C)  AD; leftward; will not 
D)  SRAS; leftward; will 
E)  AD; leftward; will 
A)  SRAS; rightward; will 
B)  SRAS; leftward; will not 
C)  AD; leftward; will not 
D)  SRAS; leftward; will 
E)  AD; leftward; will

Question 8

According to classical economists,if the amount of funds households save is greater than the amount of funds firms invest,then

Accepted Answer

A)  the interest rate will fall, ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. 
B)  the interest rate will rise, ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. 
C)  the interest rate will remain constant and people will simply buy more goods. 
D)  more money will he used for leisure purposes, since households save in order to consume leisure at some later time. 
E)  none of the above 
A)  the interest rate will fall, ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. 
B)  the interest rate will rise, ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. 
C)  the interest rate will remain constant and people will simply buy more goods. 
D)  more money will he used for leisure purposes, since households save in order to consume leisure at some later time. 
E)  none of the above

Question 9

When the actual unemployment rate is less than the natural unemployment rate,the economy is in a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 10

If the current Real GDP is less than Natural Real GDP,then the economy is

Accepted Answer

A)  in long-run equilibrium. 
B)  in a recessionary gap. 
C)  in an inflationary gap. 
D)  possibly in short-run equilibrium. 
E)  b and d 
A)  in long-run equilibrium. 
B)  in a recessionary gap. 
C)  in an inflationary gap. 
D)  possibly in short-run equilibrium. 
E)  b and d

Question 11

Exhibit 9-1
  
-Refer to Exhibit 9-1.The unemployment rate is lower at

Accepted Answer

A)  Q1 than QN. 
B)  QN than Q1. 
C)  point A than point B. 
D)  point B than point A. 
A)  Q1 than QN. 
B)  QN than Q1. 
C)  point A than point B. 
D)  point B than point A.

Question 12

The structural unemployment rate is 1.3 percent,the frictional unemployment rate is 2.1 percent,and the current unemployment rate is 4.9 percent.The economy is in

Accepted Answer

A)  a recessionary gap producing less than Natural Real GDP. 
B)  an inflationary gap producing more than Natural Real GDP. 
C)  long-run equilibrium. 
D)  an inflationary gap producing Natural Real GDP. 
E)  a recessionary gap producing more than Natural Real GDP. 
A)  a recessionary gap producing less than Natural Real GDP. 
B)  an inflationary gap producing more than Natural Real GDP. 
C)  long-run equilibrium. 
D)  an inflationary gap producing Natural Real GDP. 
E)  a recessionary gap producing more than Natural Real GDP.

Question 13

Exhibit 9-4
  
-Refer to Exhibit 9-4.When AD and SRAS cross at point (P1,Q3),the economy is in

Accepted Answer

A)  a recessionary gap. 
B)  an inflationary gap. 
C)  long-run equilibrium. 
D)  a and c 
E)  b and c 
A)  a recessionary gap. 
B)  an inflationary gap. 
C)  long-run equilibrium. 
D)  a and c 
E)  b and c

Question 14

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)  the AD curve will shift to the right and pass through point 4. 
B)  the SRAS curve will shift to the left and pass through point 2. 
C)  the economy is currently operating below its physical PPF and above its institutional PPF. 
D)  the SRAS curve will shift to the right and pass through point 3. 
A)  the AD curve will shift to the right and pass through point 4. 
B)  the SRAS curve will shift to the left and pass through point 2. 
C)  the economy is currently operating below its physical PPF and above its institutional PPF. 
D)  the SRAS curve will shift to the right and pass through point 3.

Question 15

Exhibit 9-1
  
-Refer to Exhibit 9-1.The economy is currently producing Q1.An economist who believes wages are flexible in the downward direction would argue that

Accepted Answer

A)  it is likely the economy will soon move to point B. 
B)  it is likely the economy will soon move to point A. 
C)  it is not likely the economy will move to point A on its own accord now or anytime soon. 
D)  Real GDP will soon take a downturn. 
A)  it is likely the economy will soon move to point B. 
B)  it is likely the economy will soon move to point A. 
C)  it is not likely the economy will move to point A on its own accord now or anytime soon. 
D)  Real GDP will soon take a downturn.

Question 16

In a "self-regulating" economy,inflationary and recessionary gaps

Accepted Answer

A)  never occur. 
B)  are eliminated by forces internal to the economy, without government intervention. 
C)  are eliminated by timely actions of economic policymakers. 
D)  are the desirable results of microeconomic price adjustments. 
A)  never occur. 
B)  are eliminated by forces internal to the economy, without government intervention. 
C)  are eliminated by timely actions of economic policymakers. 
D)  are the desirable results of microeconomic price adjustments.

Question 17

Describe how Say's law can hold in a money economy,according to the classical economists.

Accepted Answer

In order for Say's law to hold in a mone

Question 18

Explain how it is possible for the economy to produce at a point beyond its institutional production possibilities frontier (PPF),but not beyond its physical PPF.

Accepted Answer

The physical PPF represents the maximum

Question 19

According to classical economists,

Accepted Answer

A)  spending equals saving. 
B)  saving equals income. 
C)  income equals wealth. 
D)  none of the above 
A)  spending equals saving. 
B)  saving equals income. 
C)  income equals wealth. 
D)  none of the above

Question 20

In a barter economy,Say's law implies there

Accepted Answer

A)  can be a general overproduction of goods. 
B)  can be a general underproduction of goods. 
C)  cannot be a general overproduction or underproduction of goods. 
D)  can be a general overproduction of goods but never a general underproduction of goods. 
A)  can be a general overproduction of goods. 
B)  can be a general underproduction of goods. 
C)  cannot be a general overproduction or underproduction of goods. 
D)  can be a general overproduction of goods but never a general underproduction of goods.

Exam 9: Classical Macroeconomics and the Self Regulating Economy

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

When the economy is at its full employment Real GDP,the unemployment rate is equal to

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

A person who believes the economy is self-regulating also believes that

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

Exhibit 9-2 -Refer to Exhibit 9-2.The economy is currently producing Q1.At this level of Real GDP,the economy is experiencing

According to classical economists,if the amount of funds households save is greater than the amount of funds firms invest,then

When the actual unemployment rate is less than the natural unemployment rate,the economy is in a recessionary gap.

If the current Real GDP is less than Natural Real GDP,then the economy is

Exhibit 9-1 -Refer to Exhibit 9-1.The unemployment rate is lower at

The structural unemployment rate is 1.3 percent,the frictional unemployment rate is 2.1 percent,and the current unemployment rate is 4.9 percent.The economy is in

Exhibit 9-4 -Refer to Exhibit 9-4.When AD and SRAS cross at point (P1,Q3),the economy is in

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

Exhibit 9-1 -Refer to Exhibit 9-1.The economy is currently producing Q1.An economist who believes wages are flexible in the downward direction would argue that

In a "self-regulating" economy,inflationary and recessionary gaps

Describe how Say's law can hold in a money economy,according to the classical economists.

Explain how it is possible for the economy to produce at a point beyond its institutional production possibilities frontier (PPF),but not beyond its physical PPF.

According to classical economists,

In a barter economy,Say's law implies there

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 Q₁.At this level of Real GDP,the economy is experiencing

Exhibit 9-4 -Refer to Exhibit 9-4.When AD and SRAS cross at point (P₁,Q₃),the economy is in

Exhibit 9-1 -Refer to Exhibit 9-1.The economy is currently producing Q_1.An economist who believes wages are flexible in the downward direction would argue that