Question 1

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 A

Question 2

The number of unpaid internships is more likely to rise in an economy when the economy is in a recessionary gap and wage rates are constant than when wage rates are falling.

Accepted Answer

A) True 
 B)False  True

Question 3

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. A

Question 4

Exhibit 9-5
  
-Refer to Exhibit 9-5. Imagine 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

Question 5

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 6

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 7

Which of the following is not consistent with a self-regulating economy?

Accepted Answer

A) flexible prices 
B) flexible wages 
C) a labor market in which wages fall if there is a surplus 
D) a labor market in which wages rise if there is a shortage 
E) none of the above (all are consistent with a self-regulating economy) 
A) flexible prices 
B) flexible wages 
C) a labor market in which wages fall if there is a surplus 
D) a labor market in which wages rise if there is a shortage 
E) none of the above (all are consistent with a self-regulating economy)

Question 8

If the natural unemployment rate is 5 percent and the current unemployment rate is 6 percent, then the economy is

Accepted Answer

A) producing a level of Real GDP that is greater than the level of natural Real GDP. 
B) in an inflationary gap. 
C) producing a level of Real GDP that is less than the level of natural Real GDP. 
D) a and b 
E) b and c 
A) producing a level of Real GDP that is greater than the level of natural Real GDP. 
B) in an inflationary gap. 
C) producing a level of Real GDP that is less than the level of natural Real GDP. 
D) a and b 
E) b and c

Question 9

When the current state of the economy is such that Real GDP is less 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 10

Exhibit 9-7
  
-Refer to Exhibit 9-7. Which point is representative of the economy with an unemployment rate that is greater than the natural unemployment rate?

Accepted Answer

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

Question 11

Exhibit 9-5
  
-Refer to Exhibit 9-5. Assume that the economy starts off at point A on graph (2) with an effective minimum wage law in place. After inflation erodes the purchasing power of the minimum wage and eliminates the constraining influence of the minimum wage law on the unskilled labor market, the economy is likely to move to a point such as

Accepted Answer

A) B. 
B) G. 
C) F. 
D) C. 
E) None of the above, because the minimum wage has no influence on the amount of goods produced. 
A) B. 
B) G. 
C) F. 
D) C. 
E) None of the above, because the minimum wage has no influence on the amount of goods produced.

Question 12

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 13

Exhibit 9-4
  
-Refer to Exhibit 9-4. Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P2, the movement toward long-run equilibrium will be

Accepted Answer

A) down and along AD1. 
B) up and along AD2. 
C) down and along SRAS1. 
D) up and along SRAS2. 
E) down and along SRAS2. 
A) down and along AD1. 
B) up and along AD2. 
C) down and along SRAS1. 
D) up and along SRAS2. 
E) down and along SRAS2.

Question 14

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 15

The unemployment rate is equal to the natural unemployment rate at

Accepted Answer

A) some point within the interior of the physical PPF but beyond 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 physical PPF but beyond 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 16

If the natural unemployment rate is 5.5 percent, then the economy is at long-run equilibrium 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 17

Exhibit 9-4
  
-Refer to Exhibit 9-4. When AD and SRAS cross at the point at which the price level is equal to P1 and Real GDP is equal to 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 18

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 19

Exhibit 9-5
  
-Refer to Exhibit 9-5. Point C on graph (2) would correspond to the intersection of an AD curve and a SRAS curve at 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 20

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

Exam 9: Classical Macroeconomics and the Self Regulating Economy

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

The number of unpaid internships is more likely to rise in an economy when the economy is in a recessionary gap and wage rates are constant than when wage rates are falling.

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

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

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

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

Which of the following is not consistent with a self-regulating economy?

If the natural unemployment rate is 5 percent and the current unemployment rate is 6 percent, then the economy is

When the current state of the economy is such that Real GDP is less 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 9-7 -Refer to Exhibit 9-7. Which point is representative of the economy with an unemployment rate that is greater than the natural unemployment rate?

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

Exhibit 9-4 -Refer to Exhibit 9-4. Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P2, the movement toward long-run equilibrium will be

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

The unemployment rate is equal to the natural unemployment rate at

If the natural unemployment rate is 5.5 percent, then the economy is at long-run equilibrium when the actual unemployment rate is

Exhibit 9-4 -Refer to Exhibit 9-4. When AD and SRAS cross at the point at which the price level is equal to P1 and Real GDP is equal to Q3, the economy is in

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

Exhibit 9-5 -Refer to Exhibit 9-5. Point C on graph (2) would correspond to the intersection of an AD curve and a SRAS curve at which point(s) on graph (1)?

According to classical economists, if interest rates are flexible,

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II 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

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice 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

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

When the current state of the economy is such that Real GDP is less 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 9-4 -Refer to Exhibit 9-4. Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P₂, the movement toward long-run equilibrium will be

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 the point at which the price level is equal to P₁ and Real GDP is equal to Q₃, the economy is in