Question 1

The economy can operate

Accepted Answer

A) beyond its institutional PPF but not beyond its physical PPF. 
B) on both its institutional PPF and its physical PPF,but not at the same time. 
C) under its physical PPF but not under its institutional PPF. 
D) a and b 
E) a,b,and c 
A) beyond its institutional PPF but not beyond its physical PPF. 
B) on both its institutional PPF and its physical PPF,but not at the same time. 
C) under its physical PPF but not under its institutional PPF. 
D) a and b 
E) a,b,and c

Question 2

Which of the following is consistent with the classical position on wages and prices?

Accepted Answer

A) Wages and prices are inflexible in the downward direction,but not in the upward direction. 
B) Wages are inflexible in the downward direction,but prices are flexible. 
C) Wages and prices are flexible. 
D) Prices are inflexible in the downward direction,but wages are flexible. 
A) Wages and prices are inflexible in the downward direction,but not in the upward direction. 
B) Wages are inflexible in the downward direction,but prices are flexible. 
C) Wages and prices are flexible. 
D) Prices are inflexible in the downward direction,but wages are flexible.

Question 3

Natural disasters (such as the 2011 earthquake and tsunami in Japan)are examples of an adverse supply shock,which result in the SRAS curve shifting leftward.

Accepted Answer

A) True 
 B)False

Question 4

If the SRAS curve intersects the AD curve to the left of Natural Real GDP,the economy is

Accepted Answer

A) in a recessionary gap. 
B) at Natural Real GDP. 
C) in an inflationary gap. 
D) at full-employment Real GDP. 
A) in a recessionary gap. 
B) at Natural Real GDP. 
C) in an inflationary gap. 
D) at full-employment Real GDP.

Question 5

Which of the following equations is correct?

Accepted Answer

A) Saving = Disposable income + Consumption 
B) Saving = Disposable income x Consumption 
C) Disposable income = Consumption - Saving 
D) Saving = Disposable income - Consumption 
A) Saving = Disposable income + Consumption 
B) Saving = Disposable income x Consumption 
C) Disposable income = Consumption - Saving 
D) Saving = Disposable income - Consumption

Question 6

The classical economists felt that saving would be equal to investment because

Accepted Answer

A) wages are flexible. 
B) prices of domestic goods are flexible. 
C) interest rates are flexible. 
D) prices of imports are flexible. 
A) wages are flexible. 
B) prices of domestic goods are flexible. 
C) interest rates are flexible. 
D) prices of imports are flexible.

Question 7

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 8

When the economy is in an inflationary gap,the labor market is experiencing a _____________.In a self-regulating economy,wage rates will then ___________ and the ______________ curve will shift __________________.

Accepted Answer

A) shortage;rise;SRAS;leftward 
B) shortage;fall;SRAS;leftward 
C) surplus;rise;AD;rightward 
D) shortage;fall;AD;rightward 
E) surplus;fall;SRAS;rightward 
A) shortage;rise;SRAS;leftward 
B) shortage;fall;SRAS;leftward 
C) surplus;rise;AD;rightward 
D) shortage;fall;AD;rightward 
E) surplus;fall;SRAS;rightward

Question 9

Which of the following statements is false?

Accepted Answer

A) The classical economists believed that government should manage the economy. 
B) The classical economists believed in a policy of laissez-faire. 
C) The classical economists believed that the economy was self-regulating. 
D) The classical economists believed equilibrium output would be full-employment output. 
A) The classical economists believed that government should manage the economy. 
B) The classical economists believed in a policy of laissez-faire. 
C) The classical economists believed that the economy was self-regulating. 
D) The classical economists believed equilibrium output would be full-employment output.

Question 10

According to classical economists,if the amount of funds households save is greater than the amount of funds firms invest,then

Accepted Answer

A) the interest rate will fall,ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. 
B) the interest rate will rise,ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. 
C) the interest rate will remain constant and people will simply buy more goods. 
D) more money will he used for leisure purposes,since households save in order to consume leisure at some later time. 
E) none of the above 
A) the interest rate will fall,ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. 
B) the interest rate will rise,ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. 
C) the interest rate will remain constant and people will simply buy more goods. 
D) more money will he used for leisure purposes,since households save in order to consume leisure at some later time. 
E) none of the above

Question 11

According to classical economists,

Accepted Answer

A) spending equals saving. 
B) saving equals income. 
C) income equals wealth. 
D) none of the above 
A) spending equals saving. 
B) saving equals income. 
C) income equals wealth. 
D) none of the above

Question 12

Exhibit 9-7  
-Refer to Exhibit 9-7.Which point is representative of the economy with an unemployment rate that is less than the natural unemployment rate?

Accepted Answer

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

Question 13

If the economy is currently in a recessionary gap,

Accepted Answer

A) all economists will agree that the economy can remove itself from the recessionary gap without government intervention. 
B) some economists will argue that the economy can remove itself from the recessionary gap without government intervention. 
C) no economist will state that the economy can remove itself from the recessionary gap without government intervention. 
D) all economists will agree that over time the recessionary gap will worsen. 
A) all economists will agree that the economy can remove itself from the recessionary gap without government intervention. 
B) some economists will argue that the economy can remove itself from the recessionary gap without government intervention. 
C) no economist will state that the economy can remove itself from the recessionary gap without government intervention. 
D) all economists will agree that over time the recessionary gap will worsen.

Question 14

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

Accepted Answer

A) Wages rise,the SRAS curve shifts leftward,and both Real GDP and the price level rise. 
B) Wages fall,the SRAS curve shifts leftward,the price level rises,and Real GDP falls. 
C) Wages fall,the SRAS curve shifts rightward,and both the price level and Real GDP fall. 
D) Wages fall,the SRAS curve shifts rightward,the price level falls,and Real GDP rises. 
E) none of the above 
A) Wages rise,the SRAS curve shifts leftward,and both Real GDP and the price level rise. 
B) Wages fall,the SRAS curve shifts leftward,the price level rises,and Real GDP falls. 
C) Wages fall,the SRAS curve shifts rightward,and both the price level and Real GDP fall. 
D) Wages fall,the SRAS curve shifts rightward,the price level falls,and Real GDP rises. 
E) none of the above

Question 15

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 16

When consumers start to spend less and save more,classical macroeconomists believe that interest rates will then ______________ resulting in a(n)________________ in investment.

Accepted Answer

A) rise;increase 
B) fall;increase 
C) fall;decrease 
D) rise;decrease 
A) rise;increase 
B) fall;increase 
C) fall;decrease 
D) rise;decrease

Question 17

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 18

When the current state of the economy is such that Real GDP is less than Natural Real GDP,the economy is in a(n)____________________ gap.In this situation,the (actual)unemployment rate is ___________ than the natural unemployment rate,and there is a ________________ in the labor market.

Accepted Answer

A) recessionary;greater;shortage 
B) inflationary;less;shortage 
C) inflationary;greater;surplus 
D) recessionary;greater;surplus 
E) recessionary;less;shortage 
A) recessionary;greater;shortage 
B) inflationary;less;shortage 
C) inflationary;greater;surplus 
D) recessionary;greater;surplus 
E) recessionary;less;shortage

Question 19

If the natural unemployment rate is 5.5 percent,then the economy is in a recessionary gap when the actual unemployment rate is

Accepted Answer

A) greater than 5.5 percent. 
B) between 0 and 5.5 percent. 
C) 0 percent. 
D) 5.5 percent. 
A) greater than 5.5 percent. 
B) between 0 and 5.5 percent. 
C) 0 percent. 
D) 5.5 percent.

Question 20

The number of unpaid internships is more likely to rise in an economy when the economy is in a recessionary gap and wage rates are constant than when wage rates are falling.

Accepted Answer

A) True 
 B)False

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

The economy can operate

Which of the following is consistent with the classical position on wages and prices?

Natural disasters (such as the 2011 earthquake and tsunami in Japan)are examples of an adverse supply shock,which result in the SRAS curve shifting leftward.

If the SRAS curve intersects the AD curve to the left of Natural Real GDP,the economy is

Which of the following equations is correct?

The classical economists felt that saving would be equal to investment because

In a barter economy,Say's law implies there

When the economy is in an inflationary gap,the labor market is experiencing a _____________.In a self-regulating economy,wage rates will then ___________ and the ______________ curve will shift __________________.

Which of the following statements is false?

According to classical economists,if the amount of funds households save is greater than the amount of funds firms invest,then

According to classical economists,

Exhibit 9-7 -Refer to Exhibit 9-7.Which point is representative of the economy with an unemployment rate that is less than the natural unemployment rate?

If the economy is currently in a recessionary gap,

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

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

When consumers start to spend less and save more,classical macroeconomists believe that interest rates will then ______________ resulting in a(n)________________ in investment.

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

When the current state of the economy is such that Real GDP is less than Natural Real GDP,the economy is in a(n)____________________ gap.In this situation,the (actual)unemployment rate is ___________ than the natural unemployment rate,and there is a ________________ in the labor market.

If the natural unemployment rate is 5.5 percent,then the economy is in a recessionary gap when the actual unemployment rate is

The number of unpaid internships is more likely to rise in an economy when the economy is in a recessionary gap and wage rates are constant than when wage rates are falling.

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 the economy is in an inflationary gap,the labor market is experiencing a _______.In a self-regulating economy,wage rates will then _ and the curve will shift ________.

When consumers start to spend less and save more,classical macroeconomists believe that interest rates will then resulting in a(n)__ in investment.

When the current state of the economy is such that Real GDP is less than Natural Real GDP,the economy is in a(n)______________ gap.In this situation,the (actual)unemployment rate is _ than the natural unemployment rate,and there is a ____________ in the labor market.