Chapter 9 Economics Flashcards Preview

Economics > Chapter 9 Economics > Flashcards

Flashcards in Chapter 9 Economics Deck (21):
1

If Real GDP is greater than Natural GDP, the economy is in

An inflationary gap

2

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

3

If REAL GDP is less than Natural Real GDP, then the (actual) unemployment rate is

Greater than the natural unemployment rate

4

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

5

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

6

Suppose AD and SRAS intersect to the left of LRAS. Which is true?

The economy is in a recessionary gap

7

If the current unemployment rate is less than the natural unemployment rate, then the economy is

In an inflationary gap

8

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

9

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

10

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%.

11

If the economy is currently operating below its institutional production possibilities frontier (institutional PPF), it is

In a recessionary gap

12

In the classical view of the credit market, a rise in saving produces a rise in investment via a

Falling interest rate

13

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

Interest rate flexibility

14

Classical economists felt that planned saving would be equal to planned investment because

Interest rates are flexible

15

According to classical economists, the relationship between the amount of funds firms plan to invest and the interest rate is

Inverse.

16

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

17

Classical economists believe:

1. Savings= investment
2. Laissez-Faire
3. No government intervention
4. Investment is driven by interest rate and not by expectations

18

If Real GDP>Natural GDP, the economy is

In an inflationary gap

19

Self regulating means

The economy can remove itself from recessionary and inflationary gaps, and produce at Natural Real GDP

20

What shifts AS?

Flexible wages

21

Investment is determined by ___________ according to classical economists?

Interest rate