Question 1

In a self-regulating economy,inflationary and recessionary gaps produce shifts of the

Accepted Answer

A) AD curve that maintain the short-run equilibrium point. 
B) AD curve that move the economy to a long-run equilibrium point. 
C) SRAS curve that maintain the short-run equilibrium point. 
D) SRAS curve that move the economy to a long-run equilibrium point. 
A) AD curve that maintain the short-run equilibrium point. 
B) AD curve that move the economy to a long-run equilibrium point. 
C) SRAS curve that maintain the short-run equilibrium point. 
D) SRAS curve that move the economy to a long-run equilibrium point.

Question 2

Which of the following statements is false?

Accepted Answer

A) If the economy is self-regulating,wages are flexible. 
B) The frictional unemployment rate equals the natural unemployment rate minus the structural unemployment rate. 
C) If the economy is producing Natural Real GDP,it is operating at the natural unemployment rate. 
D) The economy is operating at full employment if it is producing more than Natural Real GDP. 
A) If the economy is self-regulating,wages are flexible. 
B) The frictional unemployment rate equals the natural unemployment rate minus the structural unemployment rate. 
C) If the economy is producing Natural Real GDP,it is operating at the natural unemployment rate. 
D) The economy is operating at full employment if it is producing more than Natural Real GDP.

Question 3

Exhibit 9-4  
-Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P3.After an initial increase in U.S.exports,the economy will move to long-run equilibrium by a shift from

Accepted Answer

A) AD3 to AD1. 
B) SRAS1 to SRAS2. 
C) SRAS2 to SRAS1. 
D) AD3 to AD2. 
E) none of the above 
A) AD3 to AD1. 
B) SRAS1 to SRAS2. 
C) SRAS2 to SRAS1. 
D) AD3 to AD2. 
E) none of the above

Question 4

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 5

Exhibit 9-4  
-Refer to Exhibit 9-4.Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P2,the movement toward long-run equilibrium will be

Accepted Answer

A) down and along AD1. 
B) up and along AD2. 
C) down and along SRAS1. 
D) up and along SRAS2. 
E) down and along SRAS2. 
A) down and along AD1. 
B) up and along AD2. 
C) down and along SRAS1. 
D) up and along SRAS2. 
E) down and along SRAS2.

Question 6

If an economy is operating __________ its institutional production possibilities frontier,it is producing __________ output than it would be at full employment.

Accepted Answer

A) below;less 
B) below;more 
C) above;less 
D) above;more 
E) a and d 
A) below;less 
B) below;more 
C) above;less 
D) above;more 
E) a and d

Question 7

If the economy is self-regulating,then it follows that

Accepted Answer

A) recessionary and inflationary gaps are temporary economic states. 
B) wages will fall when the economy is in a recessionary gap. 
C) wages will rise when the economy is in an inflationary gap. 
D) the economy is always in long-run equilibrium. 
E) a,b and c 
A) recessionary and inflationary gaps are temporary economic states. 
B) wages will fall when the economy is in a recessionary gap. 
C) wages will rise when the economy is in an inflationary gap. 
D) the economy is always in long-run equilibrium. 
E) a,b and c

Question 8

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

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 10

Exhibit 9-2  
-Refer to Exhibit 9-2.The economy is currently producing Q1.At this level of Real GDP,the economy is in

Accepted Answer

A) an inflationary gap. 
B) a recessionary gap. 
C) long-run equilibrium. 
D) none of the above 
A) an inflationary gap. 
B) a recessionary gap. 
C) long-run equilibrium. 
D) none of the above

Question 11

Exhibit 9-4  
-Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P5.If something happens that shifts the AD curve to the AD1 position,the economy will eventually settle down at a long-run equilibrium point of __________.

Accepted Answer

A) P5,Q3. 
B) P4,Q4. 
C) P3,Q3. 
D) P3,Q5. 
E) P4,Q2. 
A) P5,Q3. 
B) P4,Q4. 
C) P3,Q3. 
D) P3,Q5. 
E) P4,Q2.

Question 12

Exhibit 9-5  
-Refer to Exhibit 9-5.Imagine an AD curve intersecting an SRAS curve at Point L 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 13

Using the aggregate demand and aggregate supply (AD-SRAS)framework,explain how a large-scale natural disaster would be expected to impact the economy.Discuss how an economist who believes the economy is self-regulating would view the longer term impact of such a disaster,and whether they would advocate the need for government intervention.

Accepted Answer

A large-scale natural disaster represent

Question 14

According to classical economists,the relationship between the amount of funds households plan to save and the interest rate is

Accepted Answer

A) indirect. 
B) inverse. 
C) direct. 
D) independent. 
A) indirect. 
B) inverse. 
C) direct. 
D) independent.

Question 15

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

Accepted Answer

A) below;soon rise 
B) above;soon rise 
C) below;soon fall 
D) above;remain unchanged 
E) none of the above 
A) below;soon rise 
B) above;soon rise 
C) below;soon fall 
D) above;remain unchanged 
E) none of the above

Question 16

Suppose the economy is self-regulating,the price level is 150,the quantity demanded of Real GDP and the quantity supplied of Real GDP in the short run both equal $4.3 trillion,and the quantity supplied of Real GDP in the long run is $4.1 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 150.

Accepted Answer

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

Question 17

When the current state of the economy is such that Real GDP is greater 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 18

Exhibit 9-5  
-If the natural unemployment rate is 5.5 percent,then the economy is at long-run equilibrium when the actual unemployment rate is

Accepted Answer

A) more than 5.5 percent. 
B) between 0 and 5.5 percent. 
C) 0 percent. 
D) 5.5 percent. 
E) none of the above 
A) more than 5.5 percent. 
B) between 0 and 5.5 percent. 
C) 0 percent. 
D) 5.5 percent. 
E) none of the above

Question 19

Exhibit 9-6  
-Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,what is going to happen?

Accepted Answer

A) Wages rise,the SRAS curve shifts to the right until it passes through point 3;in long-run equilibrium the price level is lower and Real GDP is higher than at point 1. 
B) Wages fall,the SRAS curve shifts to the left until it passes through point 2;in long-run equilibrium the price level is higher and Real GDP is lower that at point 1. 
C) Wages fall,the SRAS curve shifts to the right until it passes through point 3;in long-run equilibrium the price level is lower and Real GDP is higher than at point 1. 
D) Wages rise,the AD curve shifts to the right until it passes through point 4;in long-run equilibrium the price level and Real GDP are higher than at point 1. 
E) Prices rise,the AD curve shifts to the right until it passes through point 4;in long-run equilibrium the price level and Real GDP are higher than at point 1. 
A) Wages rise,the SRAS curve shifts to the right until it passes through point 3;in long-run equilibrium the price level is lower and Real GDP is higher than at point 1. 
B) Wages fall,the SRAS curve shifts to the left until it passes through point 2;in long-run equilibrium the price level is higher and Real GDP is lower that at point 1. 
C) Wages fall,the SRAS curve shifts to the right until it passes through point 3;in long-run equilibrium the price level is lower and Real GDP is higher than at point 1. 
D) Wages rise,the AD curve shifts to the right until it passes through point 4;in long-run equilibrium the price level and Real GDP are higher than at point 1. 
E) Prices rise,the AD curve shifts to the right until it passes through point 4;in long-run equilibrium the price level and Real GDP are higher than at point 1.

Question 20

Explain the policy implications of the classical economists' beliefs.

Accepted Answer

The classical economists believed that t

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

In a self-regulating economy,inflationary and recessionary gaps produce shifts of the

Which of the following statements is false?

Exhibit 9-4 -Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P3.After an initial increase in U.S.exports,the economy will move to long-run equilibrium by a shift from

Which of the following statements is true?

Exhibit 9-4 -Refer to Exhibit 9-4.Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P2,the movement toward long-run equilibrium will be

If an economy is operating __________ its institutional production possibilities frontier,it is producing __________ output than it would be at full employment.

If the economy is self-regulating,then it follows that

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

If the economy is in a recessionary gap,

Exhibit 9-2 -Refer to Exhibit 9-2.The economy is currently producing Q1.At this level of Real GDP,the economy is in

Exhibit 9-4 -Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P5.If something happens that shifts the AD curve to the AD1 position,the economy will eventually settle down at a long-run equilibrium point of __________.

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

According to classical economists,the relationship between the amount of funds households plan to save and the interest rate is

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

When the current state of the economy is such that Real GDP is greater 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.

Exhibit 9-5 -If the natural unemployment rate is 5.5 percent,then the economy is at long-run equilibrium when the actual unemployment rate is

Exhibit 9-6 -Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,what is going to happen?

Explain the policy implications of the classical economists' beliefs.

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.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P₃.After an initial increase in U.S.exports,the economy will move to long-run equilibrium by a shift from

Exhibit 9-4 -Refer to Exhibit 9-4.Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P₂,the movement toward long-run equilibrium will be

If an economy is operating its institutional production possibilities frontier,it is producing output than it would be at full employment.

Exhibit 9-2 -Refer to Exhibit 9-2.The economy is currently producing Q₁.At this level of Real GDP,the economy is in

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

When the current state of the economy is such that Real GDP is greater 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.