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Macroeconomics

Roger A. Arnold

Chapter 9

Classical Macroeconomics and the Self-Regulating Economy - all with Video Answers

Educators

Chapter Questions

04:41

Problem 1

What is the classical economics position on (a) wages,
(b) prices, and (c) interest rates?

Natalie Britton
Natalie Britton
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01:36

Problem 2

According to classical economists, does Say's law hold in a money economy? Explain your answer.

Sandile Ndlovu
Sandile Ndlovu
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01:15

Problem 3

How do you explain why investment falls as the interest rate rises?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:15

Problem 4

Explain why saving rises as the interest rate rises.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
03:49

Problem 5

According to classical economists, does an increase in saving shift the $A D$ curve to the left? Explain your answer.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
00:51

Problem 6

What does it mean to say that the economy is in a recessionary gap? In an inflationary gap? In long-run equilibrium?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
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Problem 7

What is the state of the labor market in (a) a recessionary gap, (b) an inflationary gap,
(c) long-run equilibrium?

Rashmi Sinha
Rashmi Sinha
Numerade Educator
01:08

Problem 8

Describe the relationship of the (actual) unemployment rate to the natural unemployment rate in each of the following economic states: (a) a recessionary gap, (b) an inflationary gap, and $(\mathrm{c})$ long-run equilibrium.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
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Problem 9

Diagrammatically represent an economy in (a) an inflationary gap, (b) a recessionary gap, and (c) long-run equilibrium.

Rashmi Sinha
Rashmi Sinha
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01:37

Problem 10

Explain how an economy can operate beyond its institutional PPF but not beyond its physical PPF.

John Coffey
John Coffey
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00:45

Problem 11

According to economists who believe in a self-regulating economy, what happens-step-by-step - when the economy is in a recessionary gap? What happens when the economy is in an inflationary gap?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
00:53

Problem 12

If wage rates are not flexible, can the economy be self-regulating? Explain your answer.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
00:18

Problem 13

Explain the importance of the real balance, interest rate, and international trade effects to long-run (equilibrium) adjustment in the economy.

Jennifer Stoner
Jennifer Stoner
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02:03

Problem 14

Suppose that the economy is self-regulating, that the price level is 132 , that the quantity demanded of Real GDP is $$\$ 4$$ trillion, that the quantity supplied of Real GDP in the short run is $$\$ 3.9$$ trillion, and that the quantity supplied of Real GDP in the long run is $$\$ 4.3$$ trillion. Is the economy in short-run equilibrium? Will the price level in long-run equilibrium be greater than, less than, or equal to $$132 ?$$ Explain your answers.

Xiaomin Bian
Xiaomin Bian
Numerade Educator
02:03

Problem 15

Suppose that the economy is self-regulating, that the price level is 110 , that the quantity demanded of Real GDP is $$\$ 4$$ trillion, that the quantity supplied of Real GDP in the short run is $$\$ 4.9$$ trillion, and that the quantity supplied of Real GDP in the long run is $$\$ 4.1$$ trillion. Is the economy in short-run equilibrium? Will the price level in long-run equilibrium be greater than, less than, or equal to 4$110 ?$$ Explain your answers.

Xiaomin Bian
Xiaomin Bian
Numerade Educator
00:54

Problem 16

Yvonne is telling her friend Wendy that wages are rising and so is the unemployment rate. She tells Wendy that she (Yvonne) may be the next person to be fired at her company and that she may have to move back in with her parents. What does the economy have to do with Yvonne's possibly having to move back in with her parents?

Julie Silva
Julie Silva
Numerade Educator
07:18

Problem 17

Jim says, "I think it's a little like when you have a cold or the flu. You don't need to see a doctor. In time, your body heals itself. That's sort of the way the economy works too. We don't really need government coming to our rescue every time the economy gets a cold." According to Jim, how does the economy work?

Alex Loukas
Alex Loukas
Numerade Educator
05:28

Problem 18

Beginning with long-run equilibrium, explain what happens to the price level and Real GDP in the short run and in the long run as a result of (a) a decline in $A D,(b)$ a rise in AD,
(c) a decline in $S R A S$, and $($ d) a rise in SRAS.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator