Use the figure below to cuswer the following questions. Price level (GDP deflator, 2002-100 AS SAS SAD 0 450 500 550 600 650 700 Real GDP bilions of 2002 dollars Figure 26.3.2 29) Refer to Figure 26.32. Currently in Mythlo A) there is a below full-employment equilibrium B) the actual unemployment rate is equal to the natural unemployment rate. there is a recessionary gap. D) the actual unemployment rate is less than the natural unemployment rate. E) potential GDP is greater than equilibrium GDP.
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6) According to Classical theory, the economy is self-regulating. If it is in a recessionary gap, what happens? Question options:
Wages rise, the SRAS curve shifts leftward, and both Real GDP and the price level rise.
Wages fall, the SRAS curve shifts rightward, the price level falls, and Real GDP rises.
Wages fall, the SRAS curve shifts leftward, the price level rises, and Real GDP falls.
none of the above
7) According to the classical economists, which of the following statements is true?
Question options:
| Financial markets ensure that S will equal I.. | |||||||||||
| Interest rate flexibility will ensure that planned saving is equal to planned investment. | |||||||||||
| There is a direct relationship between the amount individuals plan to save and the interest rate - higher rates cause people to save more and lower rates reduce savings. | |||||||||||
| Interest rates determine how much business firms invest - higher interest rates reduce investment and lower rates increase investment. | |||||||||||
| All of the above are true. 10) If actual Real GDP is greater than the full employment Real GDP, then the (actual) unemployment rate is Question options:
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