Macroeconomics-Chapter 7

after the stock market crash of 1929, the Dow Jones Industrial Average: a. had decreased almost 50% from its peak b. was lower than it has been since 1921 c. both of the above d. neither of the above

A

if real GDP is less than natural real GDP: a. the economy is in a recessionary gap b. the unemployment rate will be lower than the natural employment rate c. the shortage of labor will cause wage rates to rise d. all of the above

A

the Smoot-Hawley Tariff: a. increased the average tariff rate on dutiable goods to almost 60% b. boosted U.S. exports and put the economy on the road to recovery c. marked the beginning of the recovery of stock prices d. all of the above

A

the ideal quantity of total output in the economy: a. is called natural real GDP b. is the one that will result in zero unemployment c. can be reached only with government intervention, according to classical theory d. all of the above

A

according to Marxist theory, a market economy: a. is self-regulating b. would be unstable, because of inadequate demand c. would become increasingly stable d. all of the above

B

according to classical economic theory, savings and investment will be equal because: a. demand creates its own supply b. interest rates are flexible c. wages rise in a recessionary gap d. all of the above

B

according to the classical economic theory: a. real GDP never deviates from natural real GDP b. a market economy is self-regulating c. with proper government policy, full employment can be maintained at all times d. all of the above

B

classical economic theory began with the book: a. "Das Kapital" b. "An inquiry into the nature and causes of the wealth of nations" c. "The general theory of employment, interest, and money" d. "Market economies are like you know, classical"

B

the ideal quantity of total output: a. yields an unemployment rate of zero b. yields full employment of labor c. both of the above d. neither of the above

B

according to classical economic theory: a. government intervention is necessary to maintain adequate demand b. interest rates, wages, and prices are inflexible c. the proper economic policy is laissez-faire d. all of the above

C

according to Say's law: a. supply creates its own demand b. demand creates its own supply c. the act of production leads to equivalent income to resource owners d. both a and c above

D

according to classical economic theory, a market economy will automatically close an inflationary gap by: a. the shortage of labor will cause wage rates to rise b. the increase in wage rates will shift the SRAS curve to the left c. the SRAS curve will shift to the left until real GDP equal natural real GDP d. all of the above

D

according to classical economic theory: a. the LRAS curve is vertical at natural real GDP b. changes in AD affect only the output level in the long run c. since the economy is self-regulating, the proper economic policy is laissez-faire d. both a and c above

D

according to classical theory, if the desire to save increases: a. the interest rate will fall b. the savings supply curve will shift right c. the quantity of savings and investment will be equal d. all of the above

D

according to economic classical theory: a. a market economy will automatically adjust to natural real GDP b. supply creates its own demand c. flexible interest rates assure that any consumer savings will be exactly offset by business investment d. all of the above

D

if real GDP is greater than natural real GDP: a. the economy is in an inflationary gap b. the unemployment rate will be higher than the natural unemployment rate c. the shortage of labor will cause wage rates to rise d. both a and c above

D

when the Smoot-Hawley Tariff was enacted in 1930: a. the Dow Jones Industrial Average had already dropped below its level of 1924 b. the unemployment rate had already risen to over 20% c. both of the above d. neither of the above

D

long-run equilirbium

if real GDP is EQUAL to natural real GDP

inflationary gap

if real GDP is GREATER THAN natural real GDP

recessionary gap

if real GDP is LESS THAN natural real GDP

Say's Law

supply creates its own demand