Exam 9: Classical Macroeconomics and the Self-Regulating Economy

Exhibit 9-4 -Refer to Exhibit 9-4.Assume the economy is currently in long-run equilibrium with the price level equal to P₃.If foreigners begin to buy more U.S.goods,the economy will,in the short run,move to which of the following equilibrium combinations of price level and Real GDP?

According to Say's law,

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

According to Say's law,in a money economy a reduction in consumption spending causes a __________ shift of the saving curve and therefore a __________ in the interest rate.

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

Classical economics refers to an era in the history of economic thought that stretched from the late 1600s to the mid-1800s.

The natural rate of unemployment exists at

According to classical economists,if the amount of funds households save is greater than the amount of funds firms invest,then

If the economy is currently in a recessionary gap,

Say's law states "demand creates its own supply".

It is possible for the economy to be producing at a point that lies beyond its institutional production possibilities frontier (PPF),but not its physical PPF.

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.

Exhibit 9-5 -Refer to Exhibit 9-5.Assume that the economy starts off at point A on graph (2)with an effective minimum wage law in place.After inflation erodes the purchasing power of the minimum wage,the economy is likely to move to a point such as

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

Which of the following statements is true?

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.

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

If the natural unemployment rate is 5.5 percent,then the economy is in a recessionary gap when the actual unemployment rate is

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

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