If the air masses lapse rate is 2 deg. per 1000',and the air is saturated, is the atmosphere stable or unstable?
Strictly speaking, it depends on the pressure and tempearture you start from.
While the dry adiabatic lapse rate (DALR) is pretty much a constant, the saturated adiabatic lapse rate (SALR) depends on how much water you condense out of the air. At higher pressures and temperatures there's more water and hence more latent heat coming out as the parcel goes up -- so the SALR is less. In a cold airmass starting at a few thousand feet, you might just find that the SALR is greater than 2 degC per 1000 ft, and hence the air is just about stable.