Question 1

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

Question 2

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.

Question 3

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

Question 4

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

Question 5

Explain the policy implications of the classical economists' beliefs.

Accepted Answer

The classical economists believed that t...

Question 6

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.

Question 7

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

Question 8

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.

Question 9

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.

Question 10

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 11

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

Question 12

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

Question 13

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

Question 14

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 15

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

Question 16

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

Question 17

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.

Question 18

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 19

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

Question 20

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

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the economy is in long-run equilibrium,the actual unemployment rate is less than the natural unemployment rate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 __________.

Correct AnswerverifiedShow Answer

Say's law says

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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) ?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Explain the policy implications of the classical economists' beliefs.

Correct AnswerverifiedThe classical economists believed that t...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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) ?

Correct AnswerverifiedShow Answer

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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 .

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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.

Correct Answer
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The classical economists believed that t...
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