Question 1

Exhibit 9-4
 3? A)  The unemployment rate is equal to its natural level. 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 its natural level.
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 2

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 3

Explain the policy implications of the classical economists' beliefs.

Accepted Answer

The classical economists believed that t...

Question 4

Classical economics refers to an era in the history of economic thought that stretched from about

Accepted Answer

A)   1750 to the early 1900s.
B)   1935 to the 1970s.
C)   1800 to the mid 1900s.
D)   1600 to the mid 1800s.

Question 5

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 6

Exhibit 9-7
 
-Refer to Exhibit 9-7. Which point is representative of the economy with an unemployment rate that is greater than the natural unemployment rate?

Accepted Answer

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

Question 7

According to classical economists,Say's law applies to a barter economy,but it does not apply to a money economy.

Accepted Answer

A) True 
 B)False

Question 8

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

Question 9

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 10

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)   at Natural Real GDP.
C)   in an inflationary gap.
D)   at full-employment Real GDP.

Question 11

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 12

If the economy is self-regulating and in a recessionary gap,what happens?

Accepted Answer

A)   Wages rise, the SRAS curve shifts leftward, and both Real GDP and the price level rise.
B)   Wages fall, the SRAS curve shifts leftward, the price level rises, and Real GDP falls.
C)   Wages fall, the SRAS curve shifts rightward, and both the price level and Real GDP fall.
D)   Wages fall, the SRAS curve shifts rightward, the price level falls, and Real GDP rises.
E)   none of the above

Question 13

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.

Question 14

The classical economists felt that saving would be equal to investment because

Accepted Answer

A)   wages are flexible.
B)   prices of domestic goods are flexible.
C)   interest rates are flexible.
D)   prices of imports are flexible.

Question 15

If the structural unemployment rate is 3 percent,the frictional unemployment rate is 3 percent,and the current unemployment rate is 5 percent,then the economy is in a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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 18

Exhibit 9-7
 
-Refer to Exhibit 9-7. Which point is representative of the economy on its LRAS curve?

Accepted Answer

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

Question 19

Which of the following statements is true?

Accepted Answer

A)   If current Real GDP is greater than Natural Real GDP, the economy is in a recessionary gap.
B)   If current Real GDP is less than Natural Real GDP, the economy is in long-run equilibrium.
C)   Wages are flexible if the economy is self-regulating.
D)   Wages rise but prices remain constant in long-run equilibrium.
E)   All economists believe the economy is self-regulating.

Question 20

When there is a recessionary gap,(actual) Real GDP is __________ Natural Real GDP,and the (actual) unemployment rate is __________ the natural rate of unemployment.

Accepted Answer

A)   greater than; less than
B)   greater than; greater than
C)   greater than; equal to
D)   less than; greater than
E)   less than; less than

Exam 9: Classical Macroeconomics and the Self Regulating Economy

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

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According to classical economists,Say's law applies to a barter economy,but it does not apply to a money economy.

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If the current unemployment rate is less than the natural unemployment rate,then the economy is

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If the structural unemployment rate is 3 percent,the frictional unemployment rate is 3 percent,and the current unemployment rate is 5 percent,then the economy is in a recessionary gap.

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

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Explain the policy implications of the classical economists' beliefs.

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

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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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

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Exhibit 9-7 -Refer to Exhibit 9-7. Which point is representative of the economy on its LRAS curve?

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

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If the economy is self-regulating and in a recessionary gap,what happens?

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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.

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Which of the following statements is true?

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Classical economics refers to an era in the history of economic thought that stretched from about

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When there is a recessionary gap,(actual) Real GDP is __________ Natural Real GDP,and the (actual) unemployment rate is __________ the natural rate of unemployment.

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

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The classical economists felt that saving would be equal to investment because

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Exhibit 9-7 -Refer to Exhibit 9-7. Which point is representative of the economy with an unemployment rate that is greater than the natural unemployment rate?

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

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

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The classical economists believed that t...
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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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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.

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When there is a recessionary gap,(actual) Real GDP is Natural Real GDP,and the (actual) unemployment rate is the natural rate of unemployment.

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