Question 1

Which of the following equations is correct?

Accepted Answer

A)  Saving = Disposable income + Consumption
B)  Saving = Disposable income x Consumption
C)  Disposable income = Consumption - Saving
D)  Saving = Disposable income - Consumption

Question 2

Suppose the economy is self-regulating, the price level is 150, the quantity demanded of Real GDP and the quantity supplied of Real GDP in the short run both equal $4.3 trillion, and the quantity supplied of Real GDP in the long run is $4.1 trillion. Given all of this information, we can conclude that the economy ____________ in short run equilibrium, and that the price level in long run equilibrium will be _____________ than 150.

Accepted Answer

A)  is not; less
B)  is; more
C)  is; less
D)  is not; more

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

If the economy is self-regulating, then it follows that

Accepted Answer

A)  recessionary and inflationary gaps are temporary economic states.
B)  wages will fall when the economy is in a recessionary gap.
C)  wages will rise when the economy is in an inflationary gap.
D)  the economy is always in long-run equilibrium.
E)  a, b and c

Question 5

The economy is currently operating at a point on its physical production possibilities frontier (physical PPF) . It is

Accepted Answer

A)  producing Natural Real GDP and operating below the natural unemployment rate.
B)  producing more than Natural Real GDP and operating above the natural unemployment rate.
C)  producing more than Natural Real GDP and operating below the natural unemployment rate.
D)  in long-run equilibrium.

Question 6

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 7

The long-run aggregate supply (LRAS)  curve is

Accepted Answer

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

Question 8

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 9

When the economy is in a recessionary gap, the labor market is experiencing a _____________. In a self-regulating economy, wage rates will then ___________ and the ______________ curve will shift __________________.

Accepted Answer

A)  shortage; rise; AD; rightward
B)  shortage; fall; SRAS; leftward
C)  surplus; rise; AD; rightward
D)  shortage; fall; SRAS; rightward
E)  surplus; fall; SRAS; rightward

Question 10

Exhibit 9-2
 1. At this level of Real GDP, the economy is in A) an inflationary gap. B) a recessionary gap. C) long-run equilibrium. D) none of the above" 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 in

Accepted Answer

A)  an inflationary gap.
B)  a recessionary gap.
C)  long-run equilibrium.
D)  none of the above

Question 11

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 12

According to classical economists, the economy

Accepted Answer

A)  always operates at a point below its institutional production possibilities frontier (PPF) .
B)  always operates close to or on its institutional PPF.
C)  seldom operates close to or on its institutional PPF.
D)  never operates close to or on its institutional PPF.

Question 13

According to classical economists, the relationship between the amount of funds households plan to save and the interest rate is

Accepted Answer

A)  indirect.
B)  inverse.
C)  direct.
D)  independent.

Question 14

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 15

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 16

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)  less than or greater than the natural unemployment rate, but we cannot determine which one.
E)  b and d

Question 17

Natural disasters (such as the 2011 earthquake and tsunami in Japan) are examples of an adverse supply shock, which result in the SRAS curve shifting leftward.

Accepted Answer

A) True 
 B)False

Question 18

According to Say's law, in a money economy a reduction in consumption spending causes a __________ shift of the saving curve and therefore a __________ in the interest rate.

Accepted Answer

A)  leftward; rise
B)  leftward; fall
C)  rightward; rise
D)  rightward; fall

Question 19

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 20

If an economy's institutional production possibilities frontier (institutional PPF)  shifts rightward, the economy's

Accepted Answer

A)  natural unemployment rate rises.
B)  natural unemployment rate falls.
C)  Natural Real GDP declines.
D)  physical PPF shifts leftward.
E)  physical PPF shifts rightward.

Exam 9: Classical Macroeconomics and the Self Regulating Economy

The long-run aggregate supply (LRAS) curve is

Correct Answer
verified

Which of the following equations is correct?

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

According to classical economists, the relationship between the amount of funds households plan to save and the interest rate is

Correct Answer
verified

If the economy is self-regulating, then it follows that

Correct Answer
verified

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

Correct Answer
verified

When the economy is in a recessionary gap, the labor market is experiencing a _______. In a self-regulating economy, wage rates will then _ and the curve will shift ________.

Correct Answer
verified

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

Correct Answer
verified

Natural disasters (such as the 2011 earthquake and tsunami in Japan) are examples of an adverse supply shock, which result in the SRAS curve shifting leftward.

Correct Answer
verified

If an economy's institutional production possibilities frontier (institutional PPF) shifts rightward, the economy's

Correct Answer
verified

According to Say's law, in a money economy a reduction in consumption spending causes a shift of the saving curve and therefore a in the interest rate.

Correct Answer
verified

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

Correct Answer
verified

The classical economists felt that wages and prices were flexible in

Correct Answer
verified

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

Correct Answer
verified

According to Say's law, there can be

Correct Answer
verified

Which of the following statements is false?

Correct Answer
verified

According to classical economists, the economy

Correct Answer
verified

The economy is currently operating at a point on its physical production possibilities frontier (physical PPF) . It is

Correct Answer
verified

Exam 9: Classical Macroeconomics and the Self Regulating Economy

The long-run aggregate supply (LRAS) curve is

Correct AnswerverifiedShow Answer

Which of the following equations is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to classical economists, the relationship between the amount of funds households plan to save and the interest rate is

Correct AnswerverifiedShow Answer

If the economy is self-regulating, then it follows that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the economy is in a recessionary gap, the labor market is experiencing a _____________. In a self-regulating economy, wage rates will then ___________ and the ______________ curve will shift __________________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Natural disasters (such as the 2011 earthquake and tsunami in Japan) are examples of an adverse supply shock, which result in the SRAS curve shifting leftward.

Correct AnswerverifiedShow Answer

If an economy's institutional production possibilities frontier (institutional PPF) shifts rightward, the economy's

Correct AnswerverifiedShow Answer

According to Say's law, in a money economy a reduction in consumption spending causes a __________ shift of the saving curve and therefore a __________ in the interest rate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The classical economists felt that wages and prices were flexible in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to Say's law, there can be

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

According to classical economists, the economy

Correct AnswerverifiedShow Answer

The economy is currently operating at a point on its physical production possibilities frontier (physical PPF) . It is

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

When the economy is in a recessionary gap, the labor market is experiencing a _______. In a self-regulating economy, wage rates will then _ and the curve will shift ________.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

According to Say's law, in a money economy a reduction in consumption spending causes a shift of the saving curve and therefore a in the interest rate.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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