CHAP 9
According to classical economists, if the amount of funds households save is greater than the amount of funds firms invest, then Select one: a. the interest rate will fall, ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. b. the interest rate will rise, ultimately moving to a level where the amount of funds households plan to save equals the amount of funds firms plan to invest. c. the interest rate will remain constant and people will simply buy more goods. d. more money will he used for leisure purposes, since households save in order to consume leisure at some later time. e. none of the above
A
If Real GDP is less than Natural Real GDP, the economy is in Select one: a. an inflationary gap. b. a recessionary gap. c. an unemployment gap. d. a real gap.
A
Refer to Exhibit 9-2. The economy is currently producing Q1. At this level of Real GDP, the economy is in a(n) Select one: a. inflationary gap. Correct b. recessionary gap. c. unemployment gap. d. high Real GDP gap. e. none of the above
A
Refer to Exhibit 9-8. The level of total expenditures (TE) in this economy is currently ______________ billion. Select one: a. $10,600 b. $10,900 c. $11,200 d. $8,900
A
Suppose the economy's short-run equilibrium point is to the right of the Natural Real GDP. Which of the following is true? Select one: 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.
A
The classical economists felt that there would be no general overproduction of goods because of Select one: a. wage-price flexibility. b. the law of diminishing utility. c. the law of comparative advantage. d. contestable markets.
A
The economy is currently producing Q1. At this level of Real GDP, the economy is experiencing Select one: a. a shortage in the labor market. b. a surplus in the labor market. c. neither a shortage nor a surplus in the labor market. d. all of the above are equally likely
A
The economy is in short-run equilibrium and has a recessionary gap at point Select one: a. A. b. B. c. C. d. D. e. E.
A
The physical production possibilities frontier illustrates the different combinations of goods that society can produce given Select one: a. the constraints of finite resources and the current state of technology. Correct 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
A
Which of the following statements is false? Select one: 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.
A
A laissez-faire macroeconomic policy, based on a __________ in self regulating properties of the economy, implies __________ by the government. Select one: a. belief, active policymaking b. belief, noninterference c. disbelief, active policymaking d. disbelief, noninterference
B
According to Say's law, Select one: a. if there is demand for a good, someone will supply it. b. production creates demand sufficient to purchase all goods and services produced. c. supply and demand work together to determine price. d. trading takes longer in a barter economy than in a money economy. e. none of the above
B
According to the classical economists, which of the following statements is false? Select one: 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.
B
If Real GDP is less than Natural Real GDP, the economy is in Select one: a. an inflationary gap. b. a recessionary gap. c. an unemployment gap. d. a real gap.
B
If the economy is currently in a recessionary gap, Select one: a. all economists will argue that the economy can remove the gap itself. b. some economists will argue that the economy can remove the gap itself. c. no economist will argue that the economy can remove the gap itself. d. all economists will argue that over time the recessionary gap will worsen.
B
In a "self-regulating" economy, inflationary and recessionary gaps Select one: a. never occur. b. are eliminated by forces internal to the economy, without government intervention. c. are eliminated by timely actions of economic policymakers. d. are the desirable results of microeconomic price adjustments.
B
Refer to Exhibit 9-1. If the economy is self-regulating, the price level is Select one: a. lower in short-run equilibrium than in long-run equilibrium. b. lower in long-run equilibrium than in short-run equilibrium. c. higher in long-run equilibrium than in short-run equilibrium. d. lower when the economy is in a recessionary gap than when it is in long-run equilibrium. e. a and c
B
Refer to Exhibit 9-1. The economy is currently producing Q1. An economist who believes wages are flexible in the downward direction would argue that Select one: a. it is likely the economy will soon move to point B. b. it is likely the economy will soon move to point A. c. it is not likely the economy will move to point A on its own accord now or anytime soon. d. Real GDP will soon take a downturn.
B
Refer to Exhibit 9-1. The economy is currently producing Q1. At this level of Real GDP, the economy is in a(n) Select one: a. inflationary gap. b. recessionary gap. c. unemployment gap. d. high Real GDP gap. e. none of the above
B
Refer to Exhibit 9-3. If the economy is in equilibrium at point B, Select one: 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.
B
Refer to Exhibit 9-3. The economy is in long-run equilibrium at point Select one: a. A. b. B. c. C. d. D. e. E.
B
Refer to Exhibit 9-5. Point B on graph (2) corresponds to which point(s) on graph (1)? Select one: a. I or J b. K c. L or M d. I or L e. J or M
B
Suppose the economy is self-regulating, the price level is 120, the quantity demanded of Real GDP and the quantity supplied of Real GDP in the short run both equal $5.7 trillion, and the quantity supplied of Real GDP in the long run is $5.2 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 120. Select one: a. is not; less b. is; more c. is; less d. is not; more
B
The long-run aggregate supply (LRAS) curve is Select one: a. horizontal. b. vertical. c. positively sloped. d. negatively sloped.
B
When consumers start to spend less and save more, classical macroeconomists believe that interest rates will then ______________ resulting in a(n) ________________ in investment. Select one: a. rise; increase b. fall; increase c. fall; decrease d. rise; decrease
B
When the economy is at its full employment Real GDP, the unemployment rate is equal to Select one: a. zero. b. the natural unemployment rate. c. the frictional unemployment rate. d. the structural unemployment rate.
B
When the economy is producing Real GDP at a level at which the LRAS curve intersects the AD curve the economy is Select one: a. in a recessionary gap. b. in long-run equilibrium. c. in an inflationary gap. d. operating at less than full-employment output.
B
. Refer to Exhibit 9-5. Assume that the economy starts off at point A on graph (2) with an effective minimum wage law in place. After inflation erodes the purchasing power of the minimum wage, the economy is likely to move to a point such as Select one: a. B. b. G. c. F. d. C. e. None of the above, because the minimum wage has no influence on the amount of goods produced.
C
An economy is producing its Natural Real GDP when the rate of unemployment is equal to the __________ unemployment rate. Select one: a. frictional b. structural c. sum of the frictional unemployment rate and the structural d. seasonal e. cyclical
C
If Real GDP is less than Natural Real GDP, then the (actual) unemployment rate is Select one: 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
C
If the SRAS curve intersects the AD curve to the right of Natural Real GDP, the economy is Select one: a. in a recessionary gap. b. at Natural Real GDP. c. in an inflationary gap. d. at full-employment Real GDP.
C
If the economy is self-regulating and in an inflationary gap, Select one: a. wages and prices will fall. b. wages will rise, but prices will fall. c. wages and prices will rise. d. wages will fall, but prices will rise. e. neither wages nor prices will change.
C
If the natural unemployment rate is 5 percent and the current unemployment rate is 6 percent, then the economy is Select one: a. producing more Real GDP than it does at full employment. b. in an inflationary gap. c. producing less Real GDP than it does at full employment. d. a and b e. b and c
C
In order for Say's law to hold in a money economy, Select one: 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
C
Refer to Exhibit 9-3. The economy is in short-run equilibrium and has an inflationary gap at point Select one: a. A. b. B. c. C. d. D. e. E.
C
The more institutional constraints that exist in a particular society, Select one: a. the closer the institutional PPF will lie to the physical PPF. b. the farther out from the origin the institutional PPF will lie. c. the closer to the origin the institutional PPF will lie. d. the closer to the origin the institutional PPF will lie and the farther out from the origin the physical PPF will lie.
C
A natural disaster, such as the 2011 Japanese earthquake and tsunami, shifts the ___________ curve _____________________. According to economists who believe that the economy is self-regulating, the result will be that the economy _____________be able to find its way back to Natural Real GDP without government intervention. Select one: a. SRAS; rightward; will b. SRAS; leftward; will not c. AD; leftward; will not d. SRAS; leftward; will e. AD; leftward; will
D
A necessary condition for a money economy to be self-regulating is that Select one: a. wages must be flexible in an upward direction, but not in a downward direction. b. the economy must always be operating on its institutional production possibilities frontier. c. wages must be flexible in a downward direction, but not in an upward direction. d. interest rates must be flexible in the credit market. e. none of the above
D
A necessary condition for the economy to be self-regulating is that Select one: a. wages must be relatively high. b. the labor market must always be in equilibrium. c. the interest rate must be above its equilibrium level. d. wages must be flexible in both an upward and downward direction. e. none of the above
D
Business-cycle macroeconomics involves changes in Real GDP around a ____________ LRAS curve, while economic-growth macroeconomics deals with increases in Real GDP resulting from a ______________ LRAS curve. Select one: a. rightward-shifting; fixed b. fixed; leftward shifting c. leftward shifting; fixed d. fixed; rightward-shifting
D
If Real GDP is greater than Natural Real GDP, the economy is in a(n) Select one: a. frictional gap. b. structural gap. c. recessionary gap. d. inflationary gap.
D
In a self-regulating economy, inflationary and recessionary gaps produce shifts of the Select one: a. AD curve that maintain the short-run equilibrium point. b. AD curve that move the economy to a long-run equilibrium point. c. SRAS curve that maintain the short-run equilibrium point. d. SRAS curve that move the economy to a long-run equilibrium point.
D
Refer to Exhibit 9-8. If saving increases by $500 billion, the new level of consumption will equal ______________. According to classical economists investment would _______________ and total expenditures would ________________________. Select one: a. $6,500 billion; then decrease by $500 billion; fall by $500 billion b. $6,500 billion; then increase by $500 billion; fall by $500 billion c. $7,500 billion; remain constant; fall by $500 billion d. $6,500 billion; then increase by $500 billion; remain constant
D
If the current unemployment rate is equal to the natural unemployment rate, then current Real GDP is Select one: a. greater than Natural Real GDP. b. equal to Natural Real GDP. c. equal to the Real GDP produced at full employment. d. less than Natural Real GDP. e. b and c
E
The classical economists argued that saving is matched by an equal amount of investment because of Select one: a. wage flexibility. b. price flexibility. c. money flexibility. d. interest rate flexibility. e. b and c
D
The economy can operate Select one: a. beyond its institutional PPF but not beyond its physical PPF. b. on both its institutional PPF and its physical PPF, but not at the same time. c. under its physical PPF but not under its institutional PPF. d. a and b e. a, b, and c
D
The natural rate of unemployment exists at Select one: a. some point within the interior of the PPF but outside the limits of the institutional PPF. b. some point within the interior of the physical PPF, but we cannot locate it with more accuracy. c. some point within the interior of the institutional PPF, but we cannot locate it with more accuracy. d. every point on the institutional PPF. e. every point on the physical PPF.
D
Which of the following equations is correct? Select one: a. Saving = Disposable income + Consumption b. Saving = Disposable income x Consumption c. Disposable income = Consumption - Saving d. Saving = Disposable income - Consumption
D
If the economy is in long-run equilibrium, Select one: 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
E
Refer to Exhibit 9-5. Picture an AD curve and an SRAS curve intersecting at Point I on graph (1). Which point(s) would this correspond to on graph (2)? Select one: a. A or B b. C c. D or E d. F e. G
E
Refer to Exhibit 9-5. Point C on graph (2) corresponds to which point(s) on graph (1)? Select one: a. I or J b. K c. L or M d. I or L e. J or M
E
The institutional production possibilities frontier illustrates the different combinations of goods that society can obtain given Select one: 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.
E