Question 1

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 2

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 3

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

Accepted Answer

A) wages must be relatively high. 
B) the labor market must always be in equilibrium. 
C) the interest rate must be above its equilibrium level. 
D) wages must be flexible in both an upward and downward direction. 
E) none of the above 
A) wages must be relatively high. 
B) the labor market must always be in equilibrium. 
C) the interest rate must be above its equilibrium level. 
D) wages must be flexible in both an upward and downward direction. 
E) none of the above

Question 4

Exhibit 9-5  
-If the current unemployment rate is less than the natural unemployment rate,then the economy is

Accepted Answer

A) in long-run equilibrium. 
B) in an inflationary gap. 
C) in a recessionary gap. 
D) producing at full employment. 
E) b and d 
A) in long-run equilibrium. 
B) in an inflationary gap. 
C) in a recessionary gap. 
D) producing at full employment. 
E) b and d

Question 5

Exhibit 9-5  
-Some economists believe the economy is self-regulating.What does this mean?

Accepted Answer

A) It means the economy can remove itself from recessionary and inflationary gaps and produce at Natural Real GDP. 
B) It means the economy is always in long-run equilibrium producing Natural Real GDP. 
C) It means that inflationary gaps naturally change into recessionary gaps. 
D) It means that recessionary gaps naturally change into inflationary gaps. 
E) c and d 
A) It means the economy can remove itself from recessionary and inflationary gaps and produce at Natural Real GDP. 
B) It means the economy is always in long-run equilibrium producing Natural Real GDP. 
C) It means that inflationary gaps naturally change into recessionary gaps. 
D) It means that recessionary gaps naturally change into inflationary gaps. 
E) c and d

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 8

For saving to increase,consumption must decrease,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 9

A recessionary gap exists when AD and SRAS

Accepted Answer

A) fail to intersect. 
B) intersect to the right of Natural Real GDP. 
C) intersect to the left of Natural Real GDP. 
D) both have a positive slope. 
A) fail to intersect. 
B) intersect to the right of Natural Real GDP. 
C) intersect to the left of Natural Real GDP. 
D) both have a positive slope.

Question 10

Exhibit 9-5  
-If the current unemployment rate is equal to the natural unemployment rate,then current Real GDP is

Accepted Answer

A) greater than Natural Real GDP. 
B) equal to Natural Real GDP. 
C) equal to the Real GDP produced at full employment. 
D) less than Natural Real GDP. 
E) b and c 
A) greater than Natural Real GDP. 
B) equal to Natural Real GDP. 
C) equal to the Real GDP produced at full employment. 
D) less than Natural Real GDP. 
E) b and c

Question 11

Exhibit 9-5  
-Refer to Exhibit 9-5.Point A 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 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.

Question 13

Which of the following statements is true?

Accepted Answer

A) The economy can operate outside (or beyond)its institutional PPF and its physical PPF,but only for a short while. 
B) The economy can operate outside its physical PPF,if only for a short while,but can never operate outside its institutional PPF. 
C) The economy can operate outside its institutional PPF,if only for a short while,but can never operate outside its physical PPF. 
D) The economy can never operate outside its institutional PPF or its physical PPF,even for a short while. 
E) none of the above 
A) The economy can operate outside (or beyond)its institutional PPF and its physical PPF,but only for a short while. 
B) The economy can operate outside its physical PPF,if only for a short while,but can never operate outside its institutional PPF. 
C) The economy can operate outside its institutional PPF,if only for a short while,but can never operate outside its physical PPF. 
D) The economy can never operate outside its institutional PPF or its physical PPF,even for a short while. 
E) none of the above

Question 14

The long-run aggregate supply (LRAS)curve is

Accepted Answer

A) horizontal. 
B) vertical. 
C) positively sloped. 
D) negatively sloped. 
A) horizontal. 
B) vertical. 
C) positively sloped. 
D) negatively sloped.

Question 15

In a self-regulating economy,wages will fall and prices will rise when there is an inflationary gap.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 9-4  
-Refer to Exhibit 9-4.Which of the following is true at the Real GDP level of Q3?

Accepted Answer

A) The unemployment rate is equal to the natural unemployment rate. 
B) The cyclical unemployment rate is zero. 
C) The economy is in long-run equilibrium. 
D) all of the above 
E) none of the above 
A) The unemployment rate is equal to the natural unemployment rate. 
B) The cyclical unemployment rate is zero. 
C) The economy is in long-run equilibrium. 
D) all of the above 
E) none of the above

Question 17

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 18

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 19

Business-cycle macroeconomics involves changes in Real GDP around a ____________ LRAS curve,while economic-growth macroeconomics deals with increases in Real GDP resulting from a ______________ LRAS curve.

Accepted Answer

A) rightward-shifting;fixed 
B) fixed;leftward shifting 
C) leftward shifting;fixed 
D) fixed;rightward-shifting 
A) rightward-shifting;fixed 
B) fixed;leftward shifting 
C) leftward shifting;fixed 
D) fixed;rightward-shifting

Question 20

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

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

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

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)?

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

Exhibit 9-5 -If the current unemployment rate is less than the natural unemployment rate,then the economy is

Exhibit 9-5 -Some economists believe the economy is self-regulating.What does this mean?

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

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

For saving to increase,consumption must decrease,ceteris paribus.

A recessionary gap exists when AD and SRAS

Exhibit 9-5 -If the current unemployment rate is equal to the natural unemployment rate,then current Real GDP is

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

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

Which of the following statements is true?

The long-run aggregate supply (LRAS)curve is

In a self-regulating economy,wages will fall and prices will rise when there is an inflationary gap.

Exhibit 9-4 -Refer to Exhibit 9-4.Which of the following is true at the Real GDP level of Q3?

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?

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

Business-cycle macroeconomics involves changes in Real GDP around a ____________ LRAS curve,while economic-growth macroeconomics deals with increases in Real GDP resulting from a ______________ LRAS curve.

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

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

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

Filters

Exhibit 9-4 -Refer to Exhibit 9-4.Which of the following is true at the Real GDP level of Q₃?

Business-cycle macroeconomics involves changes in Real GDP around a LRAS curve,while economic-growth macroeconomics deals with increases in Real GDP resulting from a __ LRAS curve.

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