Question 1

Suppose the economy's short-run equilibrium is at a point to the right of Natural Real GDP.Which of the following statements 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.

Question 2

Exhibit 9-5 
-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

Question 3

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.

Question 4

When the economy is producing Real GDP at the 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.

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

A necessary condition for the economy to be self-regulating is that

Accepted Answer

A)  wages must be relatively high.
B)  the labor market must always be in equilibrium.
C)  the interest rate must be above its equilibrium level.
D)  wages must be flexible in both an upward and downward direction.
E)  none of the above

Question 8

Exhibit 9-5 
-Refer to Exhibit 9-5.Point B 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 M

Question 9

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

Question 10

Exhibit 9-4 1,Q3) ,the economy is in A) a recessionary gap. B) an inflationary gap. C) long-run equilibrium. D) a and c E) b and c" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 9-4.When AD and SRAS cross at point (P1,Q3) ,the economy is in

Accepted Answer

A)  a recessionary gap.
B)  an inflationary gap.
C)  long-run equilibrium.
D)  a and c
E)  b and c

Question 11

The long-run aggregate supply (LRAS) curve is

Accepted Answer

A)  horizontal.
B)  vertical.
C)  positively sloped.
D)  negatively sloped.

Question 12

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 above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

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

Question 15

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 M

Question 16

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

Question 17

Exhibit 9-5 
-If the current unemployment rate is equal to the natural unemployment rate,then current Real GDP is

Accepted Answer

A)  greater than Natural Real GDP.
B)  equal to Natural Real GDP.
C)  equal to the Real GDP produced at full employment.
D)  less than Natural Real GDP.
E)  b and c

Question 18

For saving to increase,consumption must decrease,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 9-5 
-If the current unemployment rate is less than the natural unemployment rate,then the economy is

Accepted Answer

A)  in long-run equilibrium.
B)  in an inflationary gap.
C)  in a recessionary gap.
D)  producing at full employment.
E)  b and d

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

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

Correct AnswerverifiedShow Answer

Exhibit 9-4 -Refer to Exhibit 9-4.When AD and SRAS cross at point (P1,Q3) ,the economy is in

Correct AnswerverifiedShow Answer

Exhibit 9-5 -Some economists believe the economy is self-regulating.What does this mean?

Correct AnswerverifiedShow Answer

A recessionary gap exists when AD and SRAS

Correct AnswerverifiedShow Answer

Exhibit 9-5 -If the current unemployment rate is less than the natural unemployment rate,then the economy is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Exhibit 9-5 -Refer to Exhibit 9-5.Point B 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

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

For saving to increase,consumption must decrease,ceteris paribus.

Correct AnswerverifiedShow Answer

A necessary condition for the economy to be self-regulating is that

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

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.

Correct AnswerverifiedShow Answer

Exhibit 9-5 -If the current unemployment rate is equal to the natural unemployment rate,then current Real GDP is

Correct AnswerverifiedShow Answer

The long-run aggregate supply (LRAS) curve is

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Which of the following statements is true?

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

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

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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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Exhibit 9-4 -Refer to Exhibit 9-4.When AD and SRAS cross at point (P₁,Q₃) ,the economy is in

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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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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.

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