Question 1

If the natural unemployment rate is 5.5 percent, then the economy is in an inflationary gap when the actual unemployment rate is

Accepted Answer

A) greater than 5.5 percent. 
B) less than 5.5 percent. 
C) 0 percent. 
D) 5.5 percent. 
A) greater than 5.5 percent. 
B) less than 5.5 percent. 
C) 0 percent. 
D) 5.5 percent.

Question 2

If the natural unemployment rate is 7 percent and the current unemployment rate is 5 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 a recessionary 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 a recessionary 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 3

Suppose the AD curve and the SRAS curve intersect to the left 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 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

Suppose the economy is self-regulating and the (actual) unemployment rate is less than the natural unemployment rate. This means that the economy is producing a level of output

Accepted Answer

A) above its natural level and will eventually cut back on output. 
B) below its natural level and will eventually increase output. 
C) below its natural level but no forces exist to automatically increase output. 
D) above its natural level and institutional constraints will automatically be reduced so as to allow the economy to continue producing this level. 
E) none of the above 
A) above its natural level and will eventually cut back on output. 
B) below its natural level and will eventually increase output. 
C) below its natural level but no forces exist to automatically increase output. 
D) above its natural level and institutional constraints will automatically be reduced so as to allow the economy to continue producing this level. 
E) none of the above

Question 6

Exhibit 9-5
  
-Refer to Exhibit 9-5. Imagine an AD curve intersecting an SRAS curve at Point K 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 7

Classical economics refers to an era in the history of economic thought that stretched from the late 1600s to the mid-1800s.

Accepted Answer

A) True 
 B)False

Question 8

Say's law states that demand creates its own supply.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the natural unemployment rate is 5 percent. Which of the following observations is consistent with an economy that is self-regulating?

Accepted Answer

A) The unemployment rate in the economy is always above 5 percent. 
B) The unemployment rate in the economy is always below 5 percent. 
C) There is a tendency for the unemployment rate in the economy to move toward 5 percent if it is not already there. 
D) If the unemployment rate in the economy is greater than 5 percent, wages start to rise. 
E) If the unemployment rate in the economy is less than 5 percent, wages start to fall. 
A) The unemployment rate in the economy is always above 5 percent. 
B) The unemployment rate in the economy is always below 5 percent. 
C) There is a tendency for the unemployment rate in the economy to move toward 5 percent if it is not already there. 
D) If the unemployment rate in the economy is greater than 5 percent, wages start to rise. 
E) If the unemployment rate in the economy is less than 5 percent, wages start to fall.

Question 10

Exhibit 9-5
  
-Refer to Exhibit 9-5. Point B 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 11

In order for Say's law to hold in a money economy,

Accepted Answer

A) there must be more than four goods. 
B) funds saved must give rise to an equal amount of funds earned. 
C) funds saved must give rise to an equal amount of funds invested. 
D) none of the above 
A) there must be more than four goods. 
B) funds saved must give rise to an equal amount of funds earned. 
C) funds saved must give rise to an equal amount of funds invested. 
D) none of the above

Question 12

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

Accepted Answer

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

Question 13

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

Accepted Answer

A) below; fall. 
B) above; fall 
C) below; rise 
D) above; rise 
E) none of the above 
A) below; fall. 
B) above; fall 
C) below; rise 
D) above; rise 
E) none of the above

Question 14

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 15

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 16

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 17

Say's law states that

Accepted Answer

A) demand creates its own supply. 
B) the more supply there is, the lower prices are. 
C) supply creates supply. 
D) supply creates its own demand. 
E) none of the above 
A) demand creates its own supply. 
B) the more supply there is, the lower prices are. 
C) supply creates supply. 
D) supply creates its own demand. 
E) none of the above

Question 18

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 19

If the economy is in a recessionary gap,

Accepted Answer

A) Real GDP is greater than Natural Real GDP. 
B) Real GDP is equal to Natural Real GDP. 
C) Real GDP is less than Natural Real GDP. 
D) the (actual) unemployment rate is less than the natural unemployment rate. 
E) a and d 
A) Real GDP is greater than Natural Real GDP. 
B) Real GDP is equal to Natural Real GDP. 
C) Real GDP is less than Natural Real GDP. 
D) the (actual) unemployment rate is less than the natural unemployment rate. 
E) a and d

Question 20

Economic-growth macroeconomics deals with increases in Real GDP due to a rightward-shifting AD curve.

Accepted Answer

A) True 
 B)False

Exam 9: Classical Macroeconomics and the Self Regulating Economy

If the natural unemployment rate is 5.5 percent, then the economy is in an inflationary gap when the actual unemployment rate is

If the natural unemployment rate is 7 percent and the current unemployment rate is 5 percent, then the economy is

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

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

Suppose the economy is self-regulating and the (actual) unemployment rate is less than the natural unemployment rate. This means that the economy is producing a level of output

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

Classical economics refers to an era in the history of economic thought that stretched from the late 1600s to the mid-1800s.

Say's law states that demand creates its own supply.

Suppose the natural unemployment rate is 5 percent. Which of the following observations is consistent with an economy that is self-regulating?

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

In order for Say's law to hold in a money economy,

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

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

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

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

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

Say's law states that

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

If the economy is in a recessionary gap,

Economic-growth macroeconomics deals with increases in Real GDP due to a rightward-shifting AD curve.

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

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