Question 1

Say's law says

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 2

Some economists believe the economy is self-regulating.What does this mean?

Accepted Answer

A)  It means the economy can remove itself from recessionary and inflationary gaps and produce at Natural Real GDP. 
B)  It means the economy is always in long-run equilibrium producing Natural Real GDP. 
C)  It means that inflationary gaps naturally change into recessionary gaps. 
D)  It means that recessionary gaps naturally change into inflationary gaps. 
E)  c and d 
A)  It means the economy can remove itself from recessionary and inflationary gaps and produce at Natural Real GDP. 
B)  It means the economy is always in long-run equilibrium producing Natural Real GDP. 
C)  It means that inflationary gaps naturally change into recessionary gaps. 
D)  It means that recessionary gaps naturally change into inflationary gaps. 
E)  c and d

Question 3

Exhibit 9-5  
-Refer to Exhibit 9-5.Point G on graph (2)corresponds to 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 4

Exhibit 9-5  
-Refer to Exhibit 9-5.Point C on graph (2)corresponds to 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

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. 
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. 
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 6

Explain the policy implications of the classical economists' beliefs.

Accepted Answer

The classical economists believed that t

Question 7

Exhibit 9-5  
-Refer to Exhibit 9-5.Picture an AD curve intersecting an SRAS curve at Point M 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 8

If Real GDP is less than Natural Real GDP,then the (actual)unemployment rate is

Accepted Answer

A)  less than the natural unemployment rate. 
B)  equal to the natural unemployment rate. 
C)  greater than the natural unemployment rate. 
D)  equal to full employment. 
E)  b and d 
A)  less than the natural unemployment rate. 
B)  equal to the natural unemployment rate. 
C)  greater than the natural unemployment rate. 
D)  equal to full employment. 
E)  b and d

Question 9

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 10

Suppose the economy is self-regulating and the (actual)unemployment rate is less than the natural unemployment rate.This means that the economy is producing a level of output

Accepted Answer

A)  above its natural level and will eventually cut back on output. 
B)  below its natural level and will eventually increase output. 
C)  below its natural level but no forces exist to automatically increase output. 
D)  above its natural level and institutional constraints will automatically be reduced so as to allow the economy to continue producing this level. 
E)  none of the above 
A)  above its natural level and will eventually cut back on output. 
B)  below its natural level and will eventually increase output. 
C)  below its natural level but no forces exist to automatically increase output. 
D)  above its natural level and institutional constraints will automatically be reduced so as to allow the economy to continue producing this level. 
E)  none of the above

Question 11

Which of the following statements is true?

Accepted Answer

A)  The economy can operate outside (or beyond)its institutional PPF and its physical PPF,but only for a short while. 
B)  The economy can operate outside its physical PPF,if only for a short while,but can never operate outside its institutional PPF. 
C)  The economy can operate outside its institutional PPF,if only for a short while,but can never operate outside its physical PPF. 
D)  The economy can never operate outside its institutional PPF or its physical PPF,even for a short while. 
E)  none of the above 
A)  The economy can operate outside (or beyond)its institutional PPF and its physical PPF,but only for a short while. 
B)  The economy can operate outside its physical PPF,if only for a short while,but can never operate outside its institutional PPF. 
C)  The economy can operate outside its institutional PPF,if only for a short while,but can never operate outside its physical PPF. 
D)  The economy can never operate outside its institutional PPF or its physical PPF,even for a short while. 
E)  none of the above

Question 12

Suppose the economy's short-run equilibrium point is to the left of the Natural Real GDP.Which of the following is true?

Accepted Answer

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

Question 13

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 14

If the economy is currently operating below its institutional production possibilities frontier (institutional PPF),it is

Accepted Answer

A)  in long-run equilibrium. 
B)  in a recessionary gap. 
C)  in an inflationary gap. 
D)  definitely not self-regulating. 
E)  b and d 
A)  in long-run equilibrium. 
B)  in a recessionary gap. 
C)  in an inflationary gap. 
D)  definitely not self-regulating. 
E)  b and d

Question 15

The structural unemployment rate is 2.3 percent,the frictional unemployment rate is 2.4 percent,and the current unemployment rate is 4.1 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 16

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 17

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 18

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 19

Exhibit 9-5  
-Refer to Exhibit 9-5.Picture 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 20

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

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

Say's law says

Some economists believe the economy is self-regulating.What does this mean?

Exhibit 9-5 -Refer to Exhibit 9-5.Point G on graph (2)corresponds to which point(s)on graph (1)?

Exhibit 9-5 -Refer to Exhibit 9-5.Point C on graph (2)corresponds to which point(s)on graph (1)?

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

Explain the policy implications of the classical economists' beliefs.

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

If Real GDP is less than Natural Real GDP,then the (actual)unemployment rate is

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.

Suppose the economy is self-regulating and the (actual)unemployment rate is less than the natural unemployment rate.This means that the economy is producing a level of output

Which of the following statements is true?

Suppose the economy's short-run equilibrium point is to the left of the Natural Real GDP.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.

If the economy is currently operating below its institutional production possibilities frontier (institutional PPF),it is

The structural unemployment rate is 2.3 percent,the frictional unemployment rate is 2.4 percent,and the current unemployment rate is 4.1 percent.The economy is in

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

Which of the following statements is false?

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

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

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 __________.

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

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 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 .