Question 1

Exhibit 9-1
  
-Refer to Exhibit 9-1. If the economy is self-regulating, the price level is

Accepted Answer

A) lower in short-run equilibrium than in long-run equilibrium. 
B) lower in long-run equilibrium than in short-run equilibrium. 
C) higher in long-run equilibrium than in short-run equilibrium. 
D) lower when the economy is in a recessionary gap than when it is in long-run equilibrium. 
E) a and c 
A) lower in short-run equilibrium than in long-run equilibrium. 
B) lower in long-run equilibrium than in short-run equilibrium. 
C) higher in long-run equilibrium than in short-run equilibrium. 
D) lower when the economy is in a recessionary gap than when it is in long-run equilibrium. 
E) a and c

Question 2

If the economy is producing Natural Real GDP, then the

Accepted Answer

A) current unemployment rate is greater than the natural unemployment rate. 
B) current unemployment rate is less than the natural unemployment rate. 
C) economy is at full employment. 
D) economy is operating at the natural unemployment rate. 
E) c and d 
A) current unemployment rate is greater than the natural unemployment rate. 
B) current unemployment rate is less than the natural unemployment rate. 
C) economy is at full employment. 
D) economy is operating at the natural unemployment rate. 
E) c and d

Question 3

The structural unemployment rate is 1.5 percent, the frictional unemployment rate is 3.1 percent, and the economy's current unemployment rate is 6.9 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 4

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 5

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.

Question 6

A necessary condition for a money economy to be self-regulating is that

Accepted Answer

A) wages must be flexible in an upward direction, but not in a downward direction. 
B) the economy must always be operating on its institutional production possibilities frontier. 
C) wages must be flexible in a downward direction, but not in an upward direction. 
D) interest rates must be flexible in the credit market. 
E) none of the above 
A) wages must be flexible in an upward direction, but not in a downward direction. 
B) the economy must always be operating on its institutional production possibilities frontier. 
C) wages must be flexible in a downward direction, but not in an upward direction. 
D) interest rates must be flexible in the credit market. 
E) none of the above

Question 7

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

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 8

The physical production possibilities frontier illustrates the different combinations of goods that society can produce given

Accepted Answer

A) the constraints of finite resources and the current state of technology. 
B) a constant 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) a constant 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 9

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 10

Which of the following statements is true?

Accepted Answer

A) The long-run aggregate supply (LRAS) curve shows the Real GDP the economy is prepared to supply at different price levels, assuming wage rates and all other resource prices have fully adjusted to eliminate a recessionary or inflationary gap. 
B) Laissez-faire is a government policy of raising aggregate demand in order to eliminate a recessionary gap. 
C) An economy can operate beyond its physical PPF, but not beyond its institutional PPF. 
D) If the economy is self-regulating, it is always in long-run equilibrium. 
E) a and c 
A) The long-run aggregate supply (LRAS) curve shows the Real GDP the economy is prepared to supply at different price levels, assuming wage rates and all other resource prices have fully adjusted to eliminate a recessionary or inflationary gap. 
B) Laissez-faire is a government policy of raising aggregate demand in order to eliminate a recessionary gap. 
C) An economy can operate beyond its physical PPF, but not beyond its institutional PPF. 
D) If the economy is self-regulating, it is always in long-run equilibrium. 
E) a and c

Question 11

The structural unemployment rate is 1.7 percent, the frictional unemployment rate is 2.6 percent, and the economy's current unemployment rate is 3.9 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 12

When the economy is producing Real GDP at the level at which the LRAS curve intersects the AD curve the economy is

Accepted Answer

A) in a recessionary gap. 
B) in long-run equilibrium. 
C) in an inflationary gap. 
D) operating at less than full-employment output. 
A) in a recessionary gap. 
B) in long-run equilibrium. 
C) in an inflationary gap. 
D) operating at less than full-employment output.

Exam 9: Classical Macroeconomics and the Self Regulating Economy

Exhibit 9-1 -Refer to Exhibit 9-1. If the economy is self-regulating, the price level is

If the economy is producing Natural Real GDP, then the

The structural unemployment rate is 1.5 percent, the frictional unemployment rate is 3.1 percent, and the economy's current unemployment rate is 6.9 percent. The economy is in

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

In a barter economy, Say's law implies there

A necessary condition for a money economy to be self-regulating is that

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

The physical production possibilities frontier illustrates the different combinations of goods that society can produce given

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

Which of the following statements is true?

The structural unemployment rate is 1.7 percent, the frictional unemployment rate is 2.6 percent, and the economy's current unemployment rate is 3.9 percent. The economy is in

When the economy is producing Real GDP at the level at which the LRAS curve intersects the AD curve 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 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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