Question 1

According to the classical economists,which of the following statements is false?

Accepted Answer

A)   There is a direct relationship between the amount individuals save and the interest rate.
B)   There is a direct relationship between the amount business firms invest and the interest rate.
C)   As the interest rate rises,the quantity supplied of loanable funds rises.
D)   Interest rate flexibility will ensure that saving is equal to investment.

Question 2

When the economy is at its full employment Real GDP,the unemployment rate is equal to

Accepted Answer

A)   zero.
B)   the natural unemployment rate.
C)   the frictional unemployment rate.
D)   the structural unemployment rate.

Question 3

According to Say's law,there can be

Accepted Answer

A)   neither a general overproduction nor a general underproduction of goods.
B)   a general overproduction but not a general underproduction of goods.
C)   a general underproduction but not a general overproduction of goods.
D)   both a general overproduction and a general underproduction of goods.

Question 4

A laissez-faire macroeconomic policy,based on a __________ in self regulating properties of the economy,implies __________ by the government.

Accepted Answer

A)   belief,active policymaking
B)   belief,noninterference
C)   disbelief,active policymaking
D)   disbelief,noninterference

Question 5

Classical macroeconomists assert that "saving" is the same as "not spending at all".

Accepted Answer

A) True 
 B)False

Question 6

If the natural unemployment rate is 7 percent and the current unemployment rate is 5 percent,then the economy is

Accepted Answer

A)   producing more Real GDP than it does at full employment.
B)   in a recessionary gap.
C)   producing less Real GDP than it does at full employment.
D)   a and b
E)   b and c

Question 7

Exhibit 9-1 1.If an economist believes the economy can move itself without government intervention to QN,then he believes that the A)  LRAS curve will shift leftward until it intersects the SRAS and AD curves at Q1. B)  AD curve will shift rightward and intersect the SRAS curve at point B. C)  SRAS curve will shift rightward and intersect the AD curve at point A. D)  economy will likely stay  stuck  in short-run equilibrium." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 9-1.The economy is currently producing Q1.If an economist believes the economy can move itself without government intervention to QN,then he believes that the

Accepted Answer

A)   LRAS curve will shift leftward until it intersects the SRAS and AD curves at Q1.
B)   AD curve will shift rightward and intersect the SRAS curve at point B.
C)   SRAS curve will shift rightward and intersect the AD curve at point A.
D)   economy will likely stay "stuck" in short-run equilibrium.

Question 8

When the current state of the economy is such that Real GDP is equal to Natural Real GDP,the economy is in ____________________ .In this situation,the (actual) unemployment rate is ___________ the natural unemployment rate,and there is ________________ in the labor market.

Accepted Answer

A)   long-run equilibrium;equal to;equilibrium
B)   inflationary;less than;a shortage
C)   long-run equilibrium;greater than;equilibrium
D)   recessionary;greater than;a surplus
E)   recessionary;less than;equilibrium

Question 9

An economy is producing its Natural Real GDP when the rate of unemployment 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)   cyclical

Question 10

In a self-regulating economy,a recessionary gap will be eliminated by falling wages which will shift the SRAS curve to the right.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 9-2 1.At this level of Real GDP,the economy is experiencing A)  a shortage in the labor market. B)  a surplus in the labor market. C)  neither a shortage nor a surplus in the labor market. D)  all of the above are equally likely" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 9-2.The economy is currently producing Q1.At this level of Real GDP,the economy is experiencing

Accepted Answer

A)   a shortage in the labor market.
B)   a surplus in the labor market.
C)   neither a shortage nor a surplus in the labor market.
D)   all of the above are equally likely

Question 12

Exhibit 9-4 3.After an initial increase in U.S.exports,the long-run equilibrium will be brought about by a shift from A)  AD3 to AD1. B)  SRAS1 to SRAS2. C)  SRAS2 to SRAS1. D)  AD3 to AD2. E)  none of the above" 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 P3.After an initial increase in U.S.exports,the long-run equilibrium will be brought about by a shift from

Accepted Answer

A)   AD3 to AD1.
B)   SRAS1 to SRAS2.
C)   SRAS2 to SRAS1.
D)   AD3 to AD2.
E)   none of the above

Question 13

Exhibit 9-1 1.At this level of Real GDP,the economy is in a(n)  A)  inflationary gap. B)  recessionary gap. C)  unemployment gap. D)  high Real GDP gap. E)  none of the above" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 9-1.The economy is currently producing Q1.At this level of Real GDP,the economy is in a(n)

Accepted Answer

A)   inflationary gap.
B)   recessionary gap.
C)   unemployment gap.
D)   high Real GDP gap.
E)   none of the above

Question 14

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 15

Exhibit 9-1 
-Refer to Exhibit 9-1.If the economy is self-regulating,the price level is

Accepted Answer

A)   lower in short-run equilibrium than in long-run equilibrium.
B)   lower in long-run equilibrium than in short-run equilibrium.
C)   higher in long-run equilibrium than in short-run equilibrium.
D)   lower when the economy is in a recessionary gap than when it is in long-run equilibrium.
E)   a and c

Question 16

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

Question 17

Suppose the economy's short-run equilibrium point is to the right 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.

Question 18

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 19

The classical economists felt that wages and prices were flexible in

Accepted Answer

A)   neither the upward direction nor the downward direction.
B)   the upward direction but not in the downward direction.
C)   the downward direction but not in the upward direction.
D)   both the upward and downward directions.

Question 20

Suppose AD and SRAS intersect to the right 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.

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

According to the classical economists,which of the following statements is false?

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Exhibit 9-4 -Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P3.After an initial increase in U.S.exports,the long-run equilibrium will be brought about by a shift from

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Exhibit 9-1 -Refer to Exhibit 9-1.If the economy is self-regulating,the price level is

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

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When the economy is at its full employment Real GDP,the unemployment rate is equal to

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

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When the current state of the economy is such that Real GDP is equal to Natural Real GDP,the economy is in ____________________ .In this situation,the (actual) unemployment rate is ___________ the natural unemployment rate,and there is ________________ in the labor market.

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The classical economists felt that wages and prices were flexible in

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A laissez-faire macroeconomic policy,based on a __________ in self regulating properties of the economy,implies __________ by the government.

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In a self-regulating economy,a recessionary gap will be eliminated by falling wages which will shift the SRAS curve to the right.

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

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According to Say's law,there can be

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Exhibit 9-1 -Refer to Exhibit 9-1.The economy is currently producing Q1.At this level of Real GDP,the economy is in a(n)

Correct AnswerverifiedShow Answer

Classical macroeconomists assert that "saving" is the same as "not spending at all".

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

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If the natural unemployment rate is 7 percent and the current unemployment rate is 5 percent,then the economy is

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

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Exhibit 9-1 -Refer to Exhibit 9-1.The economy is currently producing Q1.If an economist believes the economy can move itself without government intervention to QN,then he believes that the

Correct AnswerverifiedShow Answer

A recessionary gap exists when AD and SRAS

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Exhibit 9-2 -Refer to Exhibit 9-2.The economy is currently producing Q1.At this level of Real GDP,the economy is experiencing

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Exhibit 9-4 -Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P₃.After an initial increase in U.S.exports,the long-run equilibrium will be brought about by a shift from

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When the current state of the economy is such that Real GDP is equal to Natural Real GDP,the economy is in ______________ .In this situation,the (actual) unemployment rate is _ the natural unemployment rate,and there is ____________ in the labor market.

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A laissez-faire macroeconomic policy,based on a in self regulating properties of the economy,implies by the government.

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Exhibit 9-1 -Refer to Exhibit 9-1.The economy is currently producing Q₁.At this level of Real GDP,the economy is in a(n)

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Exhibit 9-1 -Refer to Exhibit 9-1.The economy is currently producing Q₁.If an economist believes the economy can move itself without government intervention to Q_N,then he believes that the

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Exhibit 9-2 -Refer to Exhibit 9-2.The economy is currently producing Q₁.At this level of Real GDP,the economy is experiencing

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