91Ó°ÊÓ

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

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

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

Explain why saving rises as the interest rate rises.

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

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.

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

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.

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.

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.