Question 1

According to the classical theorists,it is impossible to have a

Accepted Answer

A)   surplus of a particular product.
B)   shortage of a particular product.
C)   decrease in the demand for a product.
D)   decrease in the supply of a product.
E)   general overproduction of products.F) C) and E)
G) B) and E)

Question 2

In the long run,changes in aggregate demand will affect the level of Real GDP (but not the price level)in a self-regulating economy.

Accepted Answer

A) True 
 B)False

Question 3

Due to their belief in interest rate flexibility,the classical economists argued that saving is matched by an equal amount of investment.

Accepted Answer

A) True 
 B)False

Question 4

If the natural unemployment rate is 5 percent and the current unemployment rate is 6 percent,then the economy is

Accepted Answer

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 cF) A) and D)
G) C) and D)

Question 5

Exhibit 9-6 
-Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,the real balance effect is operational and relevant between points

Accepted Answer

A)   3 and 4.
B)   1 and 2.
C)   1 and 4.
D)   1 and 3.
E)   2 and 3.F) A) and B)
G) A) and C)

Question 6

If the economy is self-regulating and in an inflationary gap,

Accepted Answer

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.F) A) and D)
G) All of the above C

Question 7

Exhibit 9-7 
-Refer to Exhibit 9-7.Which point is representative of the economy experiencing labor market shortages?

Accepted Answer

A)   A
B)   B
C)   C
D)   EE) C) and D)
F) None of the above

Question 8

A necessary condition for a money economy to be self-regulating is that

Accepted Answer

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 aboveF) A) and D)
G) B) and E)

Question 9

The classical economists felt that there would be no general overproduction of goods because of

Accepted Answer

A)   wage-price flexibility.
B)   the law of diminishing utility.
C)   the law of comparative advantage.
D)   contestable markets.E) A) and B)
F) A) and C) A

Question 10

The classical economists argued that saving is matched by an equal amount of investment because of

Accepted Answer

A)   wage flexibility.
B)   price flexibility.
C)   money flexibility.
D)   interest rate flexibility.
E)   b and cF) C) and D)
G) A) and E)

Question 11

If Real GDP is greater than Natural Real GDP,the economy is in a(n)

Accepted Answer

A)   frictional gap.
B)   structural gap.
C)   recessionary gap.
D)   inflationary gap.E) All of the above
F) C) and D)

Question 12

Exhibit 9-8
Suppose that at a given price level the following values exist in a hypothetical economy:
Consumption = $7,000 billion
Investment = $1,900 billion
Government Purchases = $1,700 billion
Exports = $300 billion
Imports = $300 billion
Assume that the level of total expenditures is equal to the value of goods and services that suppliers want to sell.
-Refer to Exhibit 9-8.The level of total expenditures (TE) in this economy is currently ______________ billion.

Accepted Answer

A)   $10,600
B)   $10,900
C)   $11,200
D)   $8,900E) C) and D)
F) A) and D)

Question 13

In a barter economy,Say's law implies there

Accepted Answer

A)   can be a general overproduction of goods.
B)   can be a general underproduction of goods.
C)   cannot be a general overproduction or underproduction of goods.
D)   can be a general overproduction of goods but never a general underproduction of goods.E) B) and C)
F) A) and B)

Question 14

Exhibit 9-8
Suppose that at a given price level the following values exist in a hypothetical economy:
Consumption = $7,000 billion
Investment = $1,900 billion
Government Purchases = $1,700 billion
Exports = $300 billion
Imports = $300 billion
Assume that the level of total expenditures is equal to the value of goods and services that suppliers want to sell.
-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 ________________________.

Accepted Answer

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 constantE) All of the above
F) B) and D)

Question 15

Exhibit 9-1 1.An economist who believes wages are flexible in the downward direction would argue that 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." class="answers-bank-image d-inline" rel="preload" >
-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

Accepted Answer

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.E) A) and B)
F) B) and C)

Question 16

An inflationary gap exists when AD and SRAS

Accepted Answer

A)   fail to intersect.
B)   intersect to the right of Natural Real GDP.
C)   intersect to the left of Natural Real GDP.
D)   both have a positive slope.E) A) and B)
F) A) and C)

Question 17

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  False

Question 18

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

Accepted Answer

A)   A
B)   B
C)   C
D)   EE) A) and D)
F) B) and D)

Question 19

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.E) B) and C)
F) A) and B)

Question 20

According to Say's law,

Accepted Answer

A)   the demand curve is negatively sloped.
B)   the supply curve is positively sloped.
C)   supply creates its own demand.
D)   economic units should produce those goods for which they are low-opportunity-cost producers.E) A) and B)
F) None of the above

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

According to the classical theorists,it is impossible to have a

Correct Answer
verified

In the long run,changes in aggregate demand will affect the level of Real GDP (but not the price level)in a self-regulating economy.

Correct Answer
verified

Due to their belief in interest rate flexibility,the classical economists argued that saving is matched by an equal amount of investment.

Correct Answer
verified

If the natural unemployment rate is 5 percent and the current unemployment rate is 6 percent,then the economy is

Correct Answer
verified

Exhibit 9-6 -Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,the real balance effect is operational and relevant between points

Correct Answer
verified

If the economy is self-regulating and in an inflationary gap,

Correct Answer
verified
C

Exhibit 9-7 -Refer to Exhibit 9-7.Which point is representative of the economy experiencing labor market shortages?

Correct Answer
verified

A necessary condition for a money economy to be self-regulating is that

Correct Answer
verified

The classical economists felt that there would be no general overproduction of goods because of

Correct Answer
verified
A

The classical economists argued that saving is matched by an equal amount of investment because of

Correct Answer
verified

If Real GDP is greater than Natural Real GDP,the economy is in a(n)

Correct Answer
verified

Correct Answer
verified

In a barter economy,Say's law implies there

Correct Answer
verified

Correct Answer
verified

Exhibit 9-1 -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

Correct Answer
verified

An inflationary gap exists when AD and SRAS

Correct Answer
verified

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

Correct Answer
verified
False

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

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

According to Say's law,

Correct Answer
verified

Exam 9: Classical Macroeconomics and the Self-Regulating Economy

According to the classical theorists,it is impossible to have a

Correct AnswerverifiedShow Answer

In the long run,changes in aggregate demand will affect the level of Real GDP (but not the price level)in a self-regulating economy.

Correct AnswerverifiedShow Answer

Due to their belief in interest rate flexibility,the classical economists argued that saving is matched by an equal amount of investment.

Correct AnswerverifiedShow Answer

If the natural unemployment rate is 5 percent and the current unemployment rate is 6 percent,then the economy is

Correct AnswerverifiedShow Answer

Exhibit 9-6 -Refer to Exhibit 9-6.If the economy is self-regulating and currently at point 1,the real balance effect is operational and relevant between points

Correct AnswerverifiedShow Answer

If the economy is self-regulating and in an inflationary gap,

Correct AnswerverifiedC

Exhibit 9-7 -Refer to Exhibit 9-7.Which point is representative of the economy experiencing labor market shortages?

Correct AnswerverifiedShow Answer

A necessary condition for a money economy to be self-regulating is that

Correct AnswerverifiedShow Answer

The classical economists felt that there would be no general overproduction of goods because of

Correct AnswerverifiedA

The classical economists argued that saving is matched by an equal amount of investment because of

Correct AnswerverifiedShow Answer

If Real GDP is greater than Natural Real GDP,the economy is in a(n)

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a barter economy,Say's law implies there

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exhibit 9-1 -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

Correct AnswerverifiedShow Answer

An inflationary gap exists when AD and SRAS

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

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

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

According to Say's law,

Correct AnswerverifiedShow Answer

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C

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A

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Exhibit 9-1 -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

Correct Answer
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Correct Answer
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Correct Answer
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False

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