Question 1

If the SRAS curve intersects the AD curve to the right of Natural Real GDP, the economy is

Accepted Answer

A)  in a recessionary gap.
B)  in either a recessionary gap or an inflationary gap, but we need more information to determine which one.
C)  in an inflationary gap.
D)  at full-employment Real GDP.E) B) and D)
F) None of the above

Question 2

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 aboveF) A) and E)
G) A) and C)

Question 3

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

Accepted Answer

A)  Wages rise, the SRAS curve shifts to the right until it passes through point 3; in long-run equilibrium the price level is lower and Real GDP is higher than at point 1.
B)  Wages fall, the SRAS curve shifts to the left until it passes through point 2; in long-run equilibrium the price level is higher and Real GDP is lower that at point 1.
C)  Wages fall, the SRAS curve shifts to the right until it passes through point 3; in long-run equilibrium the price level is lower and Real GDP is higher than at point 1.
D)  Wages rise, the AD curve shifts to the right until it passes through point 4; in long-run equilibrium the price level and Real GDP are higher than at point 1.
E)  Prices rise, the AD curve shifts to the right until it passes through point 4; in long-run equilibrium the price level and Real GDP are higher than at point 1.F) A) and B)
G) C) and D)

Question 4

In a self-regulating economy, wages will fall and prices will rise when there is an inflationary gap.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 9-4
 5. If something happens that shifts the AD curve to the AD1 position, the economy will eventually settle down at a long-run equilibrium point of __________. A) P5, Q3. B) P4, Q4. C) P3, Q3. D) P3, Q5. E) P4, Q2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 9-4. Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P5. If something happens that shifts the AD curve to the AD1 position, the economy will eventually settle down at a long-run equilibrium point of __________.

Accepted Answer

A)  P5, Q3.
B)  P4, Q4.
C)  P3, Q3.
D)  P3, Q5.
E)  P4, Q2.F) C) and D)
G) A) and E)

Question 6

In a self-regulating economy, inflationary and recessionary gaps produce shifts of the

Accepted Answer

A)  AD curve that maintain the short-run equilibrium point.
B)  AD curve that move the economy to a long-run equilibrium point.
C)  SRAS curve that maintain the short-run equilibrium point.
D)  SRAS curve that move the economy to a long-run equilibrium point.E) A) and B)
F) A) and C)

Question 7

Exhibit 9-5
 
-Refer to Exhibit 9-5. Point A 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 MF) B) and E)
G) A) and E)

Question 8

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 9

Exhibit 9-4
 3? A) The unemployment rate is equal to the natural unemployment rate. 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" class="answers-bank-image d-inline" rel="preload" >
-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 the natural unemployment rate.
B)  The cyclical unemployment rate is zero.
C)  The economy is in long-run equilibrium.
D)  all of the above
E)  none of the aboveF) A) and D)
G) A) and C)

Question 10

When the natural unemployment rate is less than the actual unemployment rate, the economy is in a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 11

A recessionary gap exists when AD and SRAS

Accepted Answer

A)  fail to intersect.
B)  intersect to the right of Natural Real GDP.
C)  intersect to the left of Natural Real GDP.
D)  both have a positive slope.E) All of the above
F) C) and D)

Question 12

When the economy is in a recessionary gap, the labor market is experiencing a surplus.

Accepted Answer

A) True 
 B)False

Question 13

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.E) B) and C)
F) A) and B)

Question 14

According to Say's law,

Accepted Answer

A)  the demand curve is negatively sloped.
B)  the supply curve is positively sloped.
C)  supply creates its own demand.
D)  economic units should produce those goods for which they are low-opportunity-cost producers.E) A) and B)
F) B) and C)

Question 15

Which of the following statements is false?

Accepted Answer

A)  The classical economists believed that government should manage the economy.
B)  The classical economists believed in a policy of laissez-faire.
C)  The classical economists believed that the economy was self-regulating.
D)  The classical economists believed equilibrium output would be full-employment output.E) B) and C)
F) A) and D)

Question 16

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.E) A) and B)
F) A) and C)

Question 17

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)  cyclicalF) None of the above
G) A) and D)

Question 18

If an economy is operating __________ its institutional production possibilities frontier, it is producing __________ output than it would be at full employment.

Accepted Answer

A)  below; less
B)  below; more
C)  above; less
D)  above; more
E)  a and dF) B) and E)
G) A) and B)

Question 19

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.E) B) and D)
F) A) and B)

Question 20

Exhibit 9-3
 
-Refer to Exhibit 9-3. The economy is in short-run equilibrium and has a recessionary gap at point

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.
E)  E.F) A) and B)
G) A) and C)

Exam 9: Classical Macroeconomics and the Self Regulating Economy

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

Correct Answer
verified

In a self-regulating economy, inflationary and recessionary gaps

Correct Answer
verified

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

Correct Answer
verified

According to Say's law,

Correct Answer
verified

Exhibit 9-3 -Refer to Exhibit 9-3. The economy is in short-run equilibrium and has a recessionary gap at point

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

When the economy is in a recessionary gap, the labor market is experiencing a surplus.

Correct Answer
verified

In a self-regulating economy, inflationary and recessionary gaps produce shifts of the

Correct Answer
verified

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

Correct Answer
verified

If an economy is operating its institutional production possibilities frontier, it is producing output than it would be at full employment.

Correct Answer
verified

When the natural unemployment rate is less than the actual unemployment rate, the economy is in a recessionary gap.

Correct Answer
verified

If the SRAS curve intersects the AD curve to the right of Natural Real GDP, the economy is

Correct Answer
verified

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

Correct Answer
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Which of the following statements is false?

Correct Answer
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A recessionary gap exists when AD and SRAS

Correct Answer
verified

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

Correct Answer
verified

The more institutional constraints that exist in a particular society,

Correct Answer
verified

Correct Answer
verified

In a self-regulating economy, wages will fall and prices will rise when there is an inflationary gap.

Correct Answer
verified

Exam 9: Classical Macroeconomics and the Self Regulating Economy

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

Correct AnswerverifiedShow Answer

In a self-regulating economy, inflationary and recessionary gaps

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to Say's law,

Correct AnswerverifiedShow Answer

Exhibit 9-3 -Refer to Exhibit 9-3. The economy is in short-run equilibrium and has a recessionary gap at point

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the economy is in a recessionary gap, the labor market is experiencing a surplus.

Correct AnswerverifiedShow Answer

In a self-regulating economy, inflationary and recessionary gaps produce shifts of the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If an economy is operating __________ its institutional production possibilities frontier, it is producing __________ output than it would be at full employment.

Correct AnswerverifiedShow Answer

When the natural unemployment rate is less than the actual unemployment rate, the economy is in a recessionary gap.

Correct AnswerverifiedShow Answer

If the SRAS curve intersects the AD curve to the right of Natural Real GDP, the economy is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

A recessionary gap exists when AD and SRAS

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The more institutional constraints that exist in a particular society,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a self-regulating economy, wages will fall and prices will rise when there is an inflationary gap.

Correct AnswerverifiedShow Answer

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If an economy is operating its institutional production possibilities frontier, it is producing output than it would be at full employment.

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

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