Question 1

Classical economics refers to an era in the history of economic thought that stretched from about

Accepted Answer

A) 1750 to the early 1900s. 
B) 1935 to the 1970s. 
C) 1800 to the mid 1900s. 
D) 1600 to the mid 1800s. 
A) 1750 to the early 1900s. 
B) 1935 to the 1970s. 
C) 1800 to the mid 1900s. 
D) 1600 to the mid 1800s.

Question 2

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

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 3

A natural disaster, such as the 2011 Japanese earthquake and tsunami, shifts the economy's ___________ 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 4

According to classical economists, most, if not all, markets are competitive.

Accepted Answer

A) True 
 B)False

Question 5

According to classical economists, Say's law applies to a barter economy, but it does not apply to a money economy.

Accepted Answer

A) True 
 B)False

Question 6

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 7

If the economy is in long-run equilibrium, the actual unemployment rate is less than the natural unemployment rate.

Accepted Answer

A) True 
 B)False

Question 8

If the economy is in long-run equilibrium,

Accepted Answer

A) prices will rise but wages will remain constant. 
B) neither prices nor wages will change. 
C) it is producing Natural Real GDP. 
D) prices will remain constant but wages may rise. 
E) b and c 
A) prices will rise but wages will remain constant. 
B) neither prices nor wages will change. 
C) it is producing Natural Real GDP. 
D) prices will remain constant but wages may rise. 
E) b and c

Question 9

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. The level of total expenditures (TE) in this economy is currently ______________ billion.

Accepted Answer

A) $10,600 
B) $10,900 
C) $11,200 
D) $8,900 
A) $10,600 
B) $10,900 
C) $11,200 
D) $8,900

Question 10

In the long run, changes in aggregate demand will affect the level of Real GDP (but not the price level) in a self-regulating economy.

Accepted Answer

A) True 
 B)False

Question 11

Suppose the AD curve and the SRAS curve intersect to the right of the LRAS curve. Which of the following is true?

Accepted Answer

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

Question 12

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 13

If the structural unemployment rate is 2 percent, the frictional unemployment rate is 3 percent, and the current unemployment rate is 8 percent, then the economy is in a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Exhibit 9-7
  
-Refer to Exhibit 9-7. Which point is representative of the economy on its LRAS curve?

Accepted Answer

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

Question 16

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 the economist 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 17

Exhibit 9-3
  
-Refer to Exhibit 9-3. The economy is in long-run equilibrium at point

Accepted Answer

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

Question 18

Suppose the economy's short-run equilibrium is at a point to the right of Natural Real GDP. Which of the following statements 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 19

Explain the policy implications of the classical economists' beliefs.

Accepted Answer

The classical economists believed that t

Question 20

The structural unemployment rate is 3.2 percent, the frictional unemployment rate is 1.8 percent, and the current unemployment rate is 6.3 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.

Exam 9: Classical Macroeconomics and the Self Regulating Economy

Classical economics refers to an era in the history of economic thought that stretched from about

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

According to classical economists, most, if not all, markets are competitive.

According to classical economists, Say's law applies to a barter economy, but it does not apply to a money economy.

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.

If the economy is in long-run equilibrium, the actual unemployment rate is less than the natural unemployment rate.

If the economy is in long-run equilibrium,

In the long run, changes in aggregate demand will affect the level of Real GDP (but not the price level) in a self-regulating economy.

Suppose the AD curve and the SRAS curve intersect to the right of the LRAS curve. Which of the following is true?

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

If the structural unemployment rate is 2 percent, the frictional unemployment rate is 3 percent, and the current unemployment rate is 8 percent, then the economy is in a recessionary gap.

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

Exhibit 9-7 -Refer to Exhibit 9-7. Which point is representative of the economy on its LRAS curve?

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 the economist believes that the

Exhibit 9-3 -Refer to Exhibit 9-3. The economy is in long-run equilibrium at point

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

Explain the policy implications of the classical economists' beliefs.

The structural unemployment rate is 3.2 percent, the frictional unemployment rate is 1.8 percent, and the current unemployment rate is 6.3 percent. The economy is in

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

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Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

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Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

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Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

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The Economic Case for and Against Government Five Topics Considered

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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 the economist believes that the