Question 1

If the economy is in long-run equilibrium,

Accepted Answer

A)   prices will rise but wages will remain constant.
B)   neither prices nor wages will change.
C)   it is producing Natural Real GDP.
D)   prices will remain constant but wages may rise.
E)   b and c

Question 2

The long-run aggregate supply (LRAS) curve is

Accepted Answer

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

Question 3

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

Question 4

Exhibit 9-4 5.If something happens that shifts the AD curve to the AD1 position,the economy will eventually settle down at a long-run equilibrium point of __________. A)  P5,Q3. B)  P4,Q4. C)  P3,Q3. D)  P3,Q5. E)  P4,Q2." 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 P5.If something happens that shifts the AD curve to the AD1 position,the economy will eventually settle down at a long-run equilibrium point of __________.

Accepted Answer

A)   P5,Q3.
B)   P4,Q4.
C)   P3,Q3.
D)   P3,Q5.
E)   P4,Q2.

Question 5

Exhibit 9-3 
-Refer to Exhibit 9-3.The economy is in short-run equilibrium and has a recessionary gap at point

Accepted Answer

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

Question 6

Which of the following statements is true?

Accepted Answer

A)   The long-run aggregate supply (LRAS) curve shows the Real GDP the economy is prepared to supply at different price levels,assuming wage rates and all other resource prices have fully adjusted to eliminate a recessionary or inflationary gap.
B)   Laissez-faire is a government policy of raising aggregate demand in order to eliminate a recessionary gap.
C)   An economy can operate beyond its physical PPF,but not beyond its institutional PPF.
D)   If the economy is self-regulating,it is always in long-run equilibrium.
E)   a and c

Question 7

Which of the following is most nearly consistent with Say's law?

Accepted Answer

A)   When a person produces one good,he or she plans to demand other goods.
B)   When a person produces a good,he or she plans to sell it.
C)   When a person buys a good,he or she plans to pay for it with money.
D)   When a person goes to work,he or she plans to produce.

Question 8

Exhibit 9-7 
-Refer to Exhibit 9-7.Which point is representative of the economy in a recessionary gap?

Accepted Answer

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

Question 9

Which of the following statements is false?

Accepted Answer

A)   The classical economists believed that government should manage the economy.
B)   The classical economists believed in a policy of laissez-faire.
C)   The classical economists believed that the economy was self-regulating.
D)   The classical economists believed equilibrium output would be full-employment output.

Question 10

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 11

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

Accepted Answer

A)   wages and prices will fall.
B)   wages will fall,but prices will rise.
C)   neither wages nor prices will change.
D)   wages will rise,but prices will fall.
E)   wages and prices will rise.

Question 12

Exhibit 9-4 2,the movement toward long-run equilibrium will be A)  down and along AD1. B)  up and along AD2. C)  down and along SRAS1. D)  up and along SRAS2. E)  down and along SRAS2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 9-4.Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P2,the movement toward long-run equilibrium will be

Accepted Answer

A)   down and along AD1.
B)   up and along AD2.
C)   down and along SRAS1.
D)   up and along SRAS2.
E)   down and along SRAS2.

Question 13

Exhibit 9-3 
-Refer to Exhibit 9-3.The economy is in long-run equilibrium at point

Accepted Answer

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

Question 14

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 15

If the economy is in a recessionary gap,

Accepted Answer

A)   Real GDP is greater than Natural Real GDP.
B)   Real GDP is equal to Natural Real GDP.
C)   Real GDP is less than Natural Real GDP.
D)   the (actual) unemployment rate is less than the natural unemployment rate.
E)   a and d

Question 16

According to classical economists,

Accepted Answer

A)   spending equals saving.
B)   saving equals income.
C)   income equals wealth.
D)   none of the above

Question 17

Exhibit 9-3 
-Refer to Exhibit 9-3.If the economy is in equilibrium at point B,

Accepted Answer

A)   the (actual) unemployment rate is less than the natural unemployment rate.
B)   the (actual) unemployment rate is equal to the natural unemployment rate.
C)   the (actual) unemployment rate is greater than the natural unemployment rate.
D)   the relationship between the (actual) unemployment rate and the natural unemployment rate cannot be determined from the available information.

Question 18

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 19

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 20

If an economy is operating __________ its institutional production possibilities frontier,it is producing __________ output than it would be at full employment.

Accepted Answer

A)   below;less
B)   below;more
C)   above;less
D)   above;more
E)   a and d

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

Which of the following statements is false?

Correct Answer
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If the economy is in long-run equilibrium,

Correct Answer
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Which of the following is most nearly consistent with Say's law?

Correct Answer
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Exhibit 9-3 -Refer to Exhibit 9-3.The economy is in short-run equilibrium and has a recessionary gap at point

Correct Answer
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If an economy is operating its institutional production possibilities frontier,it is producing output than it would be at full employment.

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

Correct Answer
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Exhibit 9-4 -Refer to Exhibit 9-4.Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P₂,the movement toward long-run equilibrium will be

Correct Answer
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Exhibit 9-3 -Refer to Exhibit 9-3.The economy is in long-run equilibrium at point

Correct Answer
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Which of the following statements is true?

Correct Answer
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The long-run aggregate supply (LRAS) curve is

Correct Answer
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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.

Correct Answer
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Exhibit 9-7 -Refer to Exhibit 9-7.Which point is representative of the economy in a recessionary gap?

Correct Answer
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In a self-regulating economy,wages will fall and prices will rise when there is an inflationary gap.

Correct Answer
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According to classical economists,

Correct Answer
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Exhibit 9-3 -Refer to Exhibit 9-3.If the economy is in equilibrium at point B,

Correct Answer
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Which of the following equations is correct?

Correct Answer
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Correct Answer
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If the economy is in a recessionary gap,

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

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

Correct Answer
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Exam 9: Classical Macroeconomics and the Self-Regulating Economy

Which of the following statements is false?

Correct AnswerverifiedShow Answer

If the economy is in long-run equilibrium,

Correct AnswerverifiedShow Answer

Which of the following is most nearly consistent with Say's law?

Correct AnswerverifiedShow Answer

Exhibit 9-3 -Refer to Exhibit 9-3.The economy is in short-run equilibrium and has a recessionary gap at point

Correct AnswerverifiedShow Answer

If an economy is operating __________ its institutional production possibilities frontier,it is producing __________ output than it would be at full employment.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Exhibit 9-4 -Refer to Exhibit 9-4.Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P2,the movement toward long-run equilibrium will be

Correct AnswerverifiedShow Answer

Exhibit 9-3 -Refer to Exhibit 9-3.The economy is in long-run equilibrium at point

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

The long-run aggregate supply (LRAS) curve is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Exhibit 9-7 -Refer to Exhibit 9-7.Which point is representative of the economy in a recessionary gap?

Correct AnswerverifiedShow Answer

In a self-regulating economy,wages will fall and prices will rise when there is an inflationary gap.

Correct AnswerverifiedShow Answer

According to classical economists,

Correct AnswerverifiedShow Answer

Exhibit 9-3 -Refer to Exhibit 9-3.If the economy is in equilibrium at point B,

Correct AnswerverifiedShow Answer

Which of the following equations is correct?

Correct AnswerverifiedShow Answer

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 P5.If something happens that shifts the AD curve to the AD1 position,the economy will eventually settle down at a long-run equilibrium point of __________.

Correct AnswerverifiedShow Answer

If the economy is in a recessionary gap,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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If an economy is operating its institutional production possibilities frontier,it is producing output than it would be at full employment.

Correct Answer
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Correct Answer
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Exhibit 9-4 -Refer to Exhibit 9-4.Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P₂,the movement toward long-run equilibrium will be

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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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.

Correct Answer
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Correct Answer
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Correct Answer
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