Question 1

In the classical view of the credit market,a rise in saving produces a rise in investment via a

Accepted Answer

A) rising interest rate. 
B) falling interest rate. 
C) rising price level. 
D) falling price level. 
A) rising interest rate. 
B) falling interest rate. 
C) rising price level. 
D) falling price level.

Question 2

If the economy is in long-run equilibrium,

Accepted Answer

A) prices will rise but wages will remain constant. 
B) neither prices nor wages will change. 
C) it is producing Natural Real GDP. 
D) prices will remain constant but wages may rise. 
E) b and c 
A) prices will rise but wages will remain constant. 
B) neither prices nor wages will change. 
C) it is producing Natural Real GDP. 
D) prices will remain constant but wages may rise. 
E) b and c

Question 3

Exhibit 9-7  
-Refer to Exhibit 9-7.Which point is representative of the economy on its LRAS curve?

Accepted Answer

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

Question 4

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

Exhibit 9-5  
-Suppose the AD curve and the SRAS curve intersect to the left of the LRAS curve.Which of the following is true?

Accepted Answer

A) The economy is in a recessionary gap. 
B) The economy is in an inflationary gap. 
C) The economy is in a long-run equilibrium. 
D) This situation is actually impossible. 
A) The economy is in a recessionary gap. 
B) The economy is in an inflationary gap. 
C) The economy is in a long-run equilibrium. 
D) This situation is actually impossible.

Question 6

If the economy is in long-run equilibrium,the actual unemployment rate is less than the natural unemployment rate.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 9-5  
-The structural unemployment rate is 1.3 percent,the frictional unemployment rate is 2.1 percent,and the economy's current unemployment rate is 4.9 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 8

If an economy's institutional production possibilities frontier (institutional PPF)shifts rightward,the economy's

Accepted Answer

A) natural unemployment rate rises. 
B) natural unemployment rate falls. 
C) Natural Real GDP declines. 
D) physical PPF shifts leftward. 
E) physical PPF shifts rightward. 
A) natural unemployment rate rises. 
B) natural unemployment rate falls. 
C) Natural Real GDP declines. 
D) physical PPF shifts leftward. 
E) physical PPF shifts rightward.

Question 9

According to classical economists,Say's law applies to a barter economy,but it does not apply to a money economy.

Accepted Answer

A) True 
 B)False

Question 10

The institutional production possibilities frontier illustrates the different combinations of goods that society can obtain given

Accepted Answer

A) the constraints of finite resources and the current state of technology. 
B) the 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) the 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 11

Which of the following is not consistent with a self-regulating economy?

Accepted Answer

A) flexible prices 
B) flexible wages 
C) a labor market in which wages fall if there is a surplus 
D) a labor market in which wages rise if there is a shortage 
E) none of the above (all are consistent with a self-regulating economy) 
A) flexible prices 
B) flexible wages 
C) a labor market in which wages fall if there is a surplus 
D) a labor market in which wages rise if there is a shortage 
E) none of the above (all are consistent with a self-regulating economy)

Question 12

Exhibit 9-5  
-Suppose the AD curve and the SRAS curve intersect to the right of the LRAS curve.Which of the following is true?

Accepted Answer

A) The economy is in a recessionary gap. 
B) The economy is in an inflationary gap. 
C) The economy is in a long-run equilibrium. 
D) This situation is actually impossible. 
A) The economy is in a recessionary gap. 
B) The economy is in an inflationary gap. 
C) The economy is in a long-run equilibrium. 
D) This situation is actually impossible.

Question 13

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

Accepted Answer

A) A or B 
B) C 
C) E or F 
D) F 
E) G 
A) A or B 
B) C 
C) E or F 
D) F 
E) G

Question 14

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 15

If the natural unemployment rate is 5 percent and the current unemployment rate is 6 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 an inflationary 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 an inflationary 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

Describe the difference between business-cycle macroeconomics and economic-growth macroeconomics.

Accepted Answer

Business-cycle macroeconomics involves c

Question 17

Exhibit 9-5  
-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 18

In order for Say's law to hold in a money economy,

Accepted Answer

A) there must be more than four goods. 
B) funds saved must give rise to an equal amount of funds earned. 
C) funds saved must give rise to an equal amount of funds invested. 
D) none of the above 
A) there must be more than four goods. 
B) funds saved must give rise to an equal amount of funds earned. 
C) funds saved must give rise to an equal amount of funds invested. 
D) none of the above

Question 19

According to classical economists,the relationship between the amount of funds firms invest and the interest rate is

Accepted Answer

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

Question 20

The structural unemployment rate is 3.1 percent,the frictional unemployment rate is 2.1 percent,and the current unemployment rate is 6.0 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.

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

In the classical view of the credit market,a rise in saving produces a rise in investment via a

If the economy is in long-run equilibrium,

Exhibit 9-7 -Refer to Exhibit 9-7.Which point is representative of the economy on its LRAS curve?

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

Exhibit 9-5 -Suppose the AD curve and the SRAS curve intersect to the left of the LRAS curve.Which of the following is true?

If the economy is in long-run equilibrium,the actual unemployment rate is less than the natural unemployment rate.

Exhibit 9-5 -The structural unemployment rate is 1.3 percent,the frictional unemployment rate is 2.1 percent,and the economy's current unemployment rate is 4.9 percent.The economy is in

If an economy's institutional production possibilities frontier (institutional PPF)shifts rightward,the economy's

According to classical economists,Say's law applies to a barter economy,but it does not apply to a money economy.

The institutional production possibilities frontier illustrates the different combinations of goods that society can obtain given

Which of the following is not consistent with a self-regulating economy?

Exhibit 9-5 -Suppose the AD curve and the SRAS curve intersect to the right of the LRAS curve.Which of the following is true?

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

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

If the natural unemployment rate is 5 percent and the current unemployment rate is 6 percent,then the economy is

Describe the difference between business-cycle macroeconomics and economic-growth macroeconomics.

Exhibit 9-5 -If the economy is producing Natural Real GDP,then the

In order for Say's law to hold in a money economy,

According to classical economists,the relationship between the amount of funds firms invest and the interest rate is

The structural unemployment rate is 3.1 percent,the frictional unemployment rate is 2.1 percent,and the current unemployment rate is 6.0 percent.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

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