Question 1

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

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 2

Due to their belief in interest rate flexibility,the classical economists argued that saving is matched by an equal amount of investment.

Accepted Answer

A) True 
 B)False

Question 3

Exhibit 9-6  
-Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,it follows that

Accepted Answer

A) there is a surplus of labor in the labor market. 
B) the economy is currently on its institutional PPF. 
C) the economy is currently in an inflationary gap. 
D) the labor market is in equilibrium. 
E) the actual unemployment rate is below the natural unemployment rate. 
A) there is a surplus of labor in the labor market. 
B) the economy is currently on its institutional PPF. 
C) the economy is currently in an inflationary gap. 
D) the labor market is in equilibrium. 
E) the actual unemployment rate is below the natural unemployment rate.

Question 4

Classical economics refers to an era in the history of economic thought that stretched from about

Accepted Answer

A) 1750 to the early 1900s. 
B) 1935 to the 1970s. 
C) 1800 to the mid 1900s. 
D) 1600 to the mid 1800s. 
A) 1750 to the early 1900s. 
B) 1935 to the 1970s. 
C) 1800 to the mid 1900s. 
D) 1600 to the mid 1800s.

Question 5

Describe how Say's law can hold in a money economy,according to the classical economists.

Accepted Answer

In order for Say's law to hold in a mone

Question 6

Suppose the natural unemployment rate is 5 percent.Which of the following observations is consistent with an economy that is self-regulating?

Accepted Answer

A) The unemployment rate in the economy is always above 5 percent. 
B) The unemployment rate in the economy is always below 5 percent. 
C) There is a tendency for the unemployment rate in the economy to move toward 5 percent if it is not already there. 
D) If the unemployment rate in the economy is greater than 5 percent,wages start to rise. 
E) If the unemployment rate in the economy is less than 5 percent,wages start to fall. 
A) The unemployment rate in the economy is always above 5 percent. 
B) The unemployment rate in the economy is always below 5 percent. 
C) There is a tendency for the unemployment rate in the economy to move toward 5 percent if it is not already there. 
D) If the unemployment rate in the economy is greater than 5 percent,wages start to rise. 
E) If the unemployment rate in the economy is less than 5 percent,wages start to fall.

Question 7

Business-cycle macroeconomics involves increases in Real GDP that result from a rightward-shifting LRAS curve.

Accepted Answer

A) True 
 B)False

Question 8

The more institutional constraints that exist in a particular society,

Accepted Answer

A) the closer the institutional PPF will lie to the physical PPF. 
B) the farther out from the origin the institutional PPF will lie. 
C) the closer to the origin the institutional PPF will lie. 
D) the closer to the origin the institutional PPF will lie and the farther out from the origin the physical PPF will lie. 
A) the closer the institutional PPF will lie to the physical PPF. 
B) the farther out from the origin the institutional PPF will lie. 
C) the closer to the origin the institutional PPF will lie. 
D) the closer to the origin the institutional PPF will lie and the farther out from the origin the physical PPF will lie.

Question 9

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

Accepted Answer

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

Question 10

A person who believes the economy is self-regulating also believes that

Accepted Answer

A) when there is a surplus in the labor market,the wage rate falls,and when there is a shortage in the labor market,the wage rate rises. 
B) it is better if the economy is in an inflationary gap than a recessionary gap. 
C) prices are flexible but wages are not. 
D) the economy is always in long-run equilibrium. 
E) the real balance effect does not operate in a recessionary gap. 
A) when there is a surplus in the labor market,the wage rate falls,and when there is a shortage in the labor market,the wage rate rises. 
B) it is better if the economy is in an inflationary gap than a recessionary gap. 
C) prices are flexible but wages are not. 
D) the economy is always in long-run equilibrium. 
E) the real balance effect does not operate in a recessionary gap.

Question 11

The classical economists felt that wages and prices were flexible in

Accepted Answer

A) neither the upward direction nor the downward direction. 
B) the upward direction but not in the downward direction. 
C) the downward direction but not in the upward direction. 
D) both the upward and downward directions. 
A) neither the upward direction nor the downward direction. 
B) the upward direction but not in the downward direction. 
C) the downward direction but not in the upward direction. 
D) both the upward and downward directions.

Question 12

The classical economists believed that wages,prices,and interest rates were flexible in both the upward and the downward direction.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is most nearly consistent with Say's law?

Accepted Answer

A) When a person produces one good,he or she plans to demand other goods. 
B) When a person produces a good,he or she plans to sell it. 
C) When a person buys a good,he or she plans to pay for it with money. 
D) When a person goes to work,he or she plans to produce. 
A) When a person produces one good,he or she plans to demand other goods. 
B) When a person produces a good,he or she plans to sell it. 
C) When a person buys a good,he or she plans to pay for it with money. 
D) When a person goes to work,he or she plans to produce.

Question 14

If the natural unemployment rate is 5.5 percent,then the economy is in an inflationary gap when the actual unemployment rate is

Accepted Answer

A) greater than 5.5 percent. 
B) less than 5.5 percent. 
C) 0 percent. 
D) 5.5 percent. 
A) greater than 5.5 percent. 
B) less than 5.5 percent. 
C) 0 percent. 
D) 5.5 percent.

Question 15

In a self-regulating economy,inflationary and recessionary gaps

Accepted Answer

A) never occur. 
B) are eliminated by forces internal to the economy,without government intervention. 
C) are eliminated by timely actions of government policymakers. 
D) are the desirable results of microeconomic price adjustments. 
A) never occur. 
B) are eliminated by forces internal to the economy,without government intervention. 
C) are eliminated by timely actions of government policymakers. 
D) are the desirable results of microeconomic price adjustments.

Question 16

According to classical economists,the economy

Accepted Answer

A) always operates at a point below its institutional production possibilities frontier (PPF). 
B) always operates close to or on its institutional PPF. 
C) seldom operates close to or on its institutional PPF. 
D) never operates close to or on its institutional PPF. 
A) always operates at a point below its institutional production possibilities frontier (PPF). 
B) always operates close to or on its institutional PPF. 
C) seldom operates close to or on its institutional PPF. 
D) never operates close to or on its institutional PPF.

Question 17

Say's law states that

Accepted Answer

A) demand creates its own supply. 
B) the more supply there is,the lower prices are. 
C) supply creates supply. 
D) supply creates its own demand. 
E) none of the above 
A) demand creates its own supply. 
B) the more supply there is,the lower prices are. 
C) supply creates supply. 
D) supply creates its own demand. 
E) none of the above

Question 18

According to Say's law,there can be

Accepted Answer

A) neither a general overproduction nor a general underproduction of goods. 
B) a general overproduction but not a general underproduction of goods. 
C) a general underproduction but not a general overproduction of goods. 
D) both a general overproduction and a general underproduction of goods. 
A) neither a general overproduction nor a general underproduction of goods. 
B) a general overproduction but not a general underproduction of goods. 
C) a general underproduction but not a general overproduction of goods. 
D) both a general overproduction and a general underproduction of goods.

Question 19

An economy is producing its Natural Real GDP when the unemployment rate is equal to the __________ unemployment rate.

Accepted Answer

A) frictional 
B) structural 
C) sum of the frictional unemployment rate and the structural 
D) seasonal 
E) cyclical 
A) frictional 
B) structural 
C) sum of the frictional unemployment rate and the structural 
D) seasonal 
E) cyclical

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

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

Due to their belief in interest rate flexibility,the classical economists argued that saving is matched by an equal amount of investment.

Exhibit 9-6 -Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,it follows that

Classical economics refers to an era in the history of economic thought that stretched from about

Describe how Say's law can hold in a money economy,according to the classical economists.

Suppose the natural unemployment rate is 5 percent.Which of the following observations is consistent with an economy that is self-regulating?

Business-cycle macroeconomics involves increases in Real GDP that result from a rightward-shifting LRAS curve.

The more institutional constraints that exist in a particular society,

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

A person who believes the economy is self-regulating also believes that

The classical economists felt that wages and prices were flexible in

The classical economists believed that wages,prices,and interest rates were flexible in both the upward and the downward direction.

Which of the following is most nearly consistent with Say's law?

If the natural unemployment rate is 5.5 percent,then the economy is in an inflationary gap when the actual unemployment rate is

In a self-regulating economy,inflationary and recessionary gaps

According to classical economists,the economy

Say's law states that

According to Say's law,there can be

An economy is producing its Natural Real GDP when the unemployment rate is equal to the __________ unemployment rate.

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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