Flashcards in Chapter 9 Economics Deck (21):
If Real GDP is greater than Natural GDP, the economy is in
An inflationary gap
Suppose the economy's short-run equilibrium point is to the right of the Natural Real GDP. What is true?
The economy is in an inflationary gap
If REAL GDP is less than Natural Real GDP, then the (actual) unemployment rate is
Greater than the natural unemployment rate
If the natural unemployment rate is 5% and the current unemployment rate is 6%, then the economy is
Producing less GDP than it does at full employment
When there is an inflationary gap, (actual) Real GDP is _________ Natural Real GDP, and the (actual) unemployment rate is _________ the natural rate of unemployment
Greater than; less than
Suppose AD and SRAS intersect to the left of LRAS. Which is true?
The economy is in a recessionary gap
If the current unemployment rate is less than the natural unemployment rate, then the economy is
In an inflationary gap
Some economists believe the economy is self regulating. What does this mean?
It means the economy can remove itself from recessionary and inflationary gaps and produce at the Natural Real GDP
If the economy is self-regulating and current Real GDP is less than the Natural Real GDP, the economy is operating _________ the natural unemployment rate and wages will__________
None of the above
Suppose the natural unemployment rate is 5%. Which observation is consistent with an economy that is self-regulating
There is a tendency for the unemployment rate in the economy to move toward 5%.
If the economy is currently operating below its institutional production possibilities frontier (institutional PPF), it is
In a recessionary gap
In the classical view of the credit market, a rise in saving produces a rise in investment via a
Falling interest rate
Classical economists argued that saving is matched by an equal amount of investment because of
Interest rate flexibility
Classical economists felt that planned saving would be equal to planned investment because
Interest rates are flexible
According to classical economists, the relationship between the amount of funds firms plan to invest and the interest rate is
I'd the natural unemployment rate is 5.5%, then the economy is in an inflationary gap when the actual unemployment rate is
Less than 5.5% percent
Classical economists believe:
1. Savings= investment
3. No government intervention
4. Investment is driven by interest rate and not by expectations
If Real GDP>Natural GDP, the economy is
In an inflationary gap
Self regulating means
The economy can remove itself from recessionary and inflationary gaps, and produce at Natural Real GDP
What shifts AS?