Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Business-cycle macroeconomics involves changes in Real GDP around a ____________ LRAS curve,while economic-growth macroeconomics deals with increases in Real GDP resulting from a ______________ LRAS curve.

Accepted Answer

A)  rightward-shifting;fixed 
B)  fixed;leftward shifting 
C)  leftward shifting;fixed 
D)  fixed;rightward-shifting 
A)  rightward-shifting;fixed 
B)  fixed;leftward shifting 
C)  leftward shifting;fixed 
D)  fixed;rightward-shifting

Question 3

If the economy is operating at a point beyond its institutional production possibilities frontier (institutional PPF),then the economy is

Accepted Answer

A)  producing Natural Real GDP and operating at the natural unemployment rate. 
B)  producing less than Natural Real GDP and operating below the natural unemployment rate. 
C)  producing more than Natural Real GDP and operating above the natural unemployment rate. 
D)  producing more than Natural Real GDP and operating below the natural unemployment rate. 
E)  none of the above 
A)  producing Natural Real GDP and operating at the natural unemployment rate. 
B)  producing less than Natural Real GDP and operating below the natural unemployment rate. 
C)  producing more than Natural Real GDP and operating above the natural unemployment rate. 
D)  producing more than Natural Real GDP and operating below the natural unemployment rate. 
E)  none of the above

Question 4

Suppose AD and SRAS intersect to the left of LRAS.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 5

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

Accepted Answer

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

Question 6

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 7

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 economic 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 economic policymakers. 
D)  are the desirable results of microeconomic price adjustments.

Question 8

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 9

When the economy is producing Real GDP at a level at which the LRAS curve intersects the AD curve the economy is

Accepted Answer

A)  in a recessionary gap. 
B)  in long-run equilibrium. 
C)  in an inflationary gap. 
D)  operating at less than full-employment output. 
A)  in a recessionary gap. 
B)  in long-run equilibrium. 
C)  in an inflationary gap. 
D)  operating at less than full-employment output.

Question 10

The economy is currently operating at a point on its physical production possibilities frontier (physical PPF).It is

Accepted Answer

A)  producing Natural Real GDP and operating below the natural unemployment rate. 
B)  producing more than Natural Real GDP and operating above the natural unemployment rate. 
C)  producing more than Natural Real GDP and operating below the natural unemployment rate. 
D)  in long-run equilibrium. 
A)  producing Natural Real GDP and operating below the natural unemployment rate. 
B)  producing more than Natural Real GDP and operating above the natural unemployment rate. 
C)  producing more than Natural Real GDP and operating below the natural unemployment rate. 
D)  in long-run equilibrium.

Question 11

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 12

A natural disaster,such as the 2011 Japanese earthquake and tsunami,shifts the ___________ curve _____________________.According to economists who believe that the economy is self-regulating,the result will be that the economy _____________be able to find its way back to Natural Real GDP without government intervention.

Accepted Answer

A)  SRAS;rightward;will 
B)  SRAS;leftward;will not 
C)  AD;leftward;will not 
D)  SRAS;leftward;will 
E)  AD;leftward;will 
A)  SRAS;rightward;will 
B)  SRAS;leftward;will not 
C)  AD;leftward;will not 
D)  SRAS;leftward;will 
E)  AD;leftward;will

Question 13

All economists agree that the economy is self-regulating.

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 9-4  
-Refer to Exhibit 9-4.Which of the following is true at the Real GDP level of Q3?

Accepted Answer

A)  The unemployment rate is equal to its natural level. 
B)  The cyclical unemployment rate is zero. 
C)  The economy is in long-run equilibrium. 
D)  all of the above 
E)  none of the above 
A)  The unemployment rate is equal to its natural level. 
B)  The cyclical unemployment rate is zero. 
C)  The economy is in long-run equilibrium. 
D)  all of the above 
E)  none of the above

Question 15

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

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

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 18

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 19

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 20

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

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

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

Business-cycle macroeconomics involves changes in Real GDP around a ____________ LRAS curve,while economic-growth macroeconomics deals with increases in Real GDP resulting from a ______________ LRAS curve.

If the economy is operating at a point beyond its institutional production possibilities frontier (institutional PPF),then the economy is

Suppose AD and SRAS intersect to the left of LRAS.Which of the following is true?

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

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

In a "self-regulating" economy,inflationary and recessionary gaps

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

When the economy is producing Real GDP at a level at which the LRAS curve intersects the AD curve the economy is

The economy is currently operating at a point on its physical production possibilities frontier (physical PPF).It is

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 __________________.

All economists agree that the economy is self-regulating.

Exhibit 9-4 -Refer to Exhibit 9-4.Which of the following is true at the Real GDP level of Q3?

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

According to classical economists,the economy

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

The economy can operate

If the economy is producing Natural Real GDP,then the

According to classical economists,if interest rates are flexible,

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, Prices and Unemployment

Macroeconomic Measurements, 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

Agriculture: Problems, policies, and Unintended Effects

Filters

Business-cycle macroeconomics involves changes in Real GDP around a LRAS curve,while economic-growth macroeconomics deals with increases in Real GDP resulting from a __ LRAS curve.

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 ________.

Exhibit 9-4 -Refer to Exhibit 9-4.Which of the following is true at the Real GDP level of Q₃?