Question 1

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

Accepted Answer

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

Question 2

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 3

Exhibit 9-5  
-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 4

Suppose the economy is self-regulating,the price level is 120,the quantity demanded of Real GDP and the quantity supplied of Real GDP in the short run both equal $5.7 trillion,and the quantity supplied of Real GDP in the long run is $5.2 trillion.Given all of this information,we can conclude that the economy ____________ in short run equilibrium,and that the price level in long run equilibrium will be _____________ than 120.

Accepted Answer

A) is not;less 
B) is;greater 
C) is;less 
D) is not;greater 
A) is not;less 
B) is;greater 
C) is;less 
D) is not;greater

Question 5

A recessionary gap exists if (actual)Real GDP is __________ Natural Real GDP.

Accepted Answer

A) less than 
B) greater than 
C) equal to 
D) b and c 
E) none of the above 
A) less than 
B) greater than 
C) equal to 
D) b and c 
E) none of the above

Question 6

An inflationary 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 7

When there is a recessionary gap, (actual)Real GDP is __________ Natural Real GDP,and the (actual)unemployment rate is __________ the natural unemployment rate.

Accepted Answer

A) greater than;less than 
B) greater than;greater than 
C) greater than;equal to 
D) less than;greater than 
E) less than;less than 
A) greater than;less than 
B) greater than;greater than 
C) greater than;equal to 
D) less than;greater than 
E) less than;less than

Question 8

According to Say's law,

Accepted Answer

A) if there is demand for a good,someone will supply it. 
B) production creates demand sufficient to purchase all goods and services produced. 
C) supply and demand work together to determine price. 
D) trading takes longer in a barter economy than in a money economy. 
E) none of the above 
A) if there is demand for a good,someone will supply it. 
B) production creates demand sufficient to purchase all goods and services produced. 
C) supply and demand work together to determine price. 
D) trading takes longer in a barter economy than in a money economy. 
E) none of the above

Question 9

Exhibit 9-5  
-The frictional unemployment rate is 2.5 percent,the structural unemployment rate is 3.1 percent,and the economy's current unemployment rate is 5.6 percent.The economy is in

Accepted Answer

A) an inflationary gap producing more than Natural Real GDP. 
B) a recessionary gap producing more than Natural Real GDP. 
C) an inflationary gap producing Natural Real GDP. 
D) a recessionary gap producing less than Natural Real GDP. 
E) long-run equilibrium. 
A) an inflationary gap producing more than Natural Real GDP. 
B) a recessionary gap producing more than Natural Real GDP. 
C) an inflationary gap producing Natural Real GDP. 
D) a recessionary gap producing less than Natural Real GDP. 
E) long-run equilibrium.

Question 10

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 11

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 12

Which of the following statements is true?

Accepted Answer

A) If current Real GDP is greater than Natural Real GDP,the economy is in a recessionary gap. 
B) If current Real GDP is less than Natural Real GDP,the economy is in long-run equilibrium. 
C) Wages are flexible if the economy is self-regulating. 
D) Wages rise but prices remain constant in long-run equilibrium. 
E) All economists believe the economy is self-regulating. 
A) If current Real GDP is greater than Natural Real GDP,the economy is in a recessionary gap. 
B) If current Real GDP is less than Natural Real GDP,the economy is in long-run equilibrium. 
C) Wages are flexible if the economy is self-regulating. 
D) Wages rise but prices remain constant in long-run equilibrium. 
E) All economists believe the economy is self-regulating.

Question 13

The classical economists felt that there would be no general overproduction of goods because of

Accepted Answer

A) wage-price flexibility. 
B) the law of diminishing utility. 
C) the law of comparative advantage. 
D) contestable markets. 
A) wage-price flexibility. 
B) the law of diminishing utility. 
C) the law of comparative advantage. 
D) contestable markets.

Question 14

When the economy is producing the level of output equal to natural Real GDP,the unemployment rate is equal to

Accepted Answer

A) zero. 
B) the natural unemployment rate. 
C) the frictional unemployment rate. 
D) the structural unemployment rate. 
A) zero. 
B) the natural unemployment rate. 
C) the frictional unemployment rate. 
D) the structural unemployment rate.

Question 15

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

Question 16

All economists agree that the economy is self-regulating.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Exhibit 9-5  
-A laissez-faire macroeconomic policy,based on a __________ in self regulating properties of the economy,implies __________ by the government.

Accepted Answer

A) belief;active policymaking 
B) belief;noninterference 
C) disbelief;active policymaking 
D) disbelief;noninterference 
A) belief;active policymaking 
B) belief;noninterference 
C) disbelief;active policymaking 
D) disbelief;noninterference

Question 19

In a self-regulating economy,a recessionary gap will be eliminated by falling wages which will shift the SRAS curve to the right.

Accepted Answer

A) True 
 B)False

Question 20

If Real GDP is less than Natural Real GDP,then the (actual)unemployment rate is

Accepted Answer

A) less than the natural unemployment rate. 
B) equal to the natural unemployment rate. 
C) greater than the natural unemployment rate. 
D) less than or greater than the natural unemployment rate,but we cannot determine which one. 
E) b and d 
A) less than the natural unemployment rate. 
B) equal to the natural unemployment rate. 
C) greater than the natural unemployment rate. 
D) less than or greater than the natural unemployment rate,but we cannot determine which one. 
E) b and d

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

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

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)?

Exhibit 9-5 -If the current Real GDP is less than Natural Real GDP,then the economy is

A recessionary gap exists if (actual)Real GDP is __________ Natural Real GDP.

An inflationary gap exists when AD and SRAS

When there is a recessionary gap, (actual)Real GDP is __________ Natural Real GDP,and the (actual)unemployment rate is __________ the natural unemployment rate.

According to Say's law,

Exhibit 9-5 -The frictional unemployment rate is 2.5 percent,the structural unemployment rate is 3.1 percent,and the economy's current unemployment rate is 5.6 percent.The economy is in

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

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

Which of the following statements is true?

The classical economists felt that there would be no general overproduction of goods because of

When the economy is producing the level of output equal to natural Real GDP,the unemployment rate is equal to

According to classical economists,if interest rates are flexible,

All economists agree that the economy is self-regulating.

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

Exhibit 9-5 -A laissez-faire macroeconomic policy,based on a __________ in self regulating properties of the economy,implies __________ by the government.

In a self-regulating economy,a recessionary gap will be eliminated by falling wages which will shift the SRAS curve to the right.

If Real GDP is less than Natural Real GDP,then the (actual)unemployment rate 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

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

When there is a recessionary gap, (actual)Real GDP is Natural Real GDP,and the (actual)unemployment rate is the natural unemployment rate.

Exhibit 9-5 -A laissez-faire macroeconomic policy,based on a in self regulating properties of the economy,implies by the government.