Question 1

Which of the following provides the most accurate description of monetary policy?

Accepted Answer

A) the deliberate control of the money supply to achieve macroeconomic goals 
B) the use of the government's regulatory powers to improve economic efficiency 
C) the government provision of goods to improve economic efficiency 
D) the use of government taxation and expenditures to achieve macroeconomic goals 
A) the deliberate control of the money supply to achieve macroeconomic goals 
B) the use of the government's regulatory powers to improve economic efficiency 
C) the government provision of goods to improve economic efficiency 
D) the use of government taxation and expenditures to achieve macroeconomic goals

Question 2

If the expected rate of inflation is zero, the real interest rate must

Accepted Answer

A) also equal zero. 
B) be greater than the money (nominal) interest rate. 
C) be equal to the money (nominal) interest rate. 
D) be less than the money (nominal) interest rate. 
A) also equal zero. 
B) be greater than the money (nominal) interest rate. 
C) be equal to the money (nominal) interest rate. 
D) be less than the money (nominal) interest rate.

Question 3

The market for labor services is included in the

Accepted Answer

A) loanable funds market. 
B) goods and services market. 
C) resource market. 
D) financial market. 
A) loanable funds market. 
B) goods and services market. 
C) resource market. 
D) financial market.

Question 4

As the real interest rate in the domestic loanable funds market increases,

Accepted Answer

A) the cost of purchasing goods and services during the current period will decline. 
B) the net inflow of capital from abroad will increase. 
C) the inflationary premium will rise, and the money rate of interest will decline. 
D) the inflationary premium will fall, and the money rate of interest will rise. 
A) the cost of purchasing goods and services during the current period will decline. 
B) the net inflow of capital from abroad will increase. 
C) the inflationary premium will rise, and the money rate of interest will decline. 
D) the inflationary premium will fall, and the money rate of interest will rise.

Question 5

Which of the following will always be true when an economy is in long-run equilibrium?

Accepted Answer

A) The level of prices will be constant (that is, inflation will be zero). 
B) Actual output will exceed the potential output. 
C) The actual rate of unemployment will be less than the natural rate of unemployment. 
D) The output of the economy will correspond with the full-employment output. 
A) The level of prices will be constant (that is, inflation will be zero). 
B) Actual output will exceed the potential output. 
C) The actual rate of unemployment will be less than the natural rate of unemployment. 
D) The output of the economy will correspond with the full-employment output.

Question 6

As prices rise, people will buy fewer goods and services because

Accepted Answer

A) the interest rate has declined. 
B) aggregate demand has increased. 
C) the purchasing power of the fixed quantity of money has declined. 
D) the income of households has increased. 
A) the interest rate has declined. 
B) aggregate demand has increased. 
C) the purchasing power of the fixed quantity of money has declined. 
D) the income of households has increased.

Question 7

In the short run, if prices were above equilibrium,

Accepted Answer

A) excess aggregate demand for goods and services would place downward pressure on prices. 
B) excess aggregate supply of goods and services would place upward pressure on prices. 
C) excess aggregate demand for goods and services would place upward pressure on prices. 
D) excess aggregate supply of goods and services would place downward pressure on prices. 
A) excess aggregate demand for goods and services would place downward pressure on prices. 
B) excess aggregate supply of goods and services would place upward pressure on prices. 
C) excess aggregate demand for goods and services would place upward pressure on prices. 
D) excess aggregate supply of goods and services would place downward pressure on prices.

Question 8

A decrease in the dollar price of foreign currency would cause

Accepted Answer

A) the nation's imports to increase and exports to decline. 
B) the nation's exports to increase and imports to decline. 
C) both imports and exports to decline. 
D) both imports and exports to rise. 
A) the nation's imports to increase and exports to decline. 
B) the nation's exports to increase and imports to decline. 
C) both imports and exports to decline. 
D) both imports and exports to rise.

Question 9

Figure 9-1  
-In Figure 9-1, which of the following correctly labels the curves in the aggregate demand/aggregate supply model?

Accepted Answer

A) (1) is LRAS, (2) is SRAS, and (3) is AD. 
B) (1) is SRAS, (2) is LRAS, and (3) is AD. 
C) (1) is AD, (2) is SRAS, and (3) is LRAS. 
D) (1) is LRAS, (2) is AD, and (3) is SRAS. 
A) (1) is LRAS, (2) is SRAS, and (3) is AD. 
B) (1) is SRAS, (2) is LRAS, and (3) is AD. 
C) (1) is AD, (2) is SRAS, and (3) is LRAS. 
D) (1) is LRAS, (2) is AD, and (3) is SRAS.

Question 10

Darius lent Alejandro $1,000 for one year with the understanding that Alejandro would repay $1,070. If the actual inflation rate was 7 percent, what was the real rate of interest Darius received?

Accepted Answer

A) 14 percent 
B) 7 percent 
C) 4 percent 
D) 0 percent 
E) -7 percent 
A) 14 percent 
B) 7 percent 
C) 4 percent 
D) 0 percent 
E) -7 percent

Question 11

The money interest rate may be a misleading indicator of real borrowing costs when

Accepted Answer

A) the unemployment rate is high. 
B) the actual rate of unemployment exceeds the natural rate of unemployment. 
C) the inflation rate is high. 
D) real output is declining. 
A) the unemployment rate is high. 
B) the actual rate of unemployment exceeds the natural rate of unemployment. 
C) the inflation rate is high. 
D) real output is declining.

Question 12

The international substitution effect exists because a

Accepted Answer

A) higher price level will reduce interest rates and stimulate foreign investment. 
B) lower price level will make domestically produced goods less expensive relative to foreign goods. 
C) higher price level will reduce the purchasing power of money. 
D) lower price level will encourage Americans to import more foreign goods. 
A) higher price level will reduce interest rates and stimulate foreign investment. 
B) lower price level will make domestically produced goods less expensive relative to foreign goods. 
C) higher price level will reduce the purchasing power of money. 
D) lower price level will encourage Americans to import more foreign goods.

Question 13

Within the framework of the AD/AS model, if a long-run equilibrium is present in the goods and services market,

Accepted Answer

A) decision makers will have accurately forecast the current price level when they arrived at resource price and loanable funds agreements. 
B) the profit rates of the firms will generally exceed the competitive level. 
C) the actual rate of unemployment will fall below the natural rate of unemployment. 
D) the current rate of output will be sustainable in the future. 
E) both a and d are correct. 
A) decision makers will have accurately forecast the current price level when they arrived at resource price and loanable funds agreements. 
B) the profit rates of the firms will generally exceed the competitive level. 
C) the actual rate of unemployment will fall below the natural rate of unemployment. 
D) the current rate of output will be sustainable in the future. 
E) both a and d are correct.

Question 14

When equilibrium is present, if market conditions do not change,

Accepted Answer

A) the current price will tend to rise in the future, and the current quantity will tend to fall. 
B) the current price will tend to fall in the future, and the current quantity will tend to rise. 
C) the current price and quantity will tend to persist in the future. 
D) the current price will tend to persist in the future, but the current quantity will tend to rise. 
A) the current price will tend to rise in the future, and the current quantity will tend to fall. 
B) the current price will tend to fall in the future, and the current quantity will tend to rise. 
C) the current price and quantity will tend to persist in the future. 
D) the current price will tend to persist in the future, but the current quantity will tend to rise.

Question 15

Use the figure below to answer the following question(s).
Figure 9-2  
-Which of the following is true for the economy depicted in Figure 9-2?

Accepted Answer

A) Potential output equals y1. 
B) It would be impossible for this economy to achieve an output greater than y1. 
C) When output y1 is achieved, the actual rate of unemployment will exceed the natural rate of unemployment. 
D) When output y1 is achieved, the actual rate of unemployment will be less than the natural rate of unemployment. 
A) Potential output equals y1. 
B) It would be impossible for this economy to achieve an output greater than y1. 
C) When output y1 is achieved, the actual rate of unemployment will exceed the natural rate of unemployment. 
D) When output y1 is achieved, the actual rate of unemployment will be less than the natural rate of unemployment.

Question 16

If equilibrium is present in the foreign exchange market and a nation is experiencing a trade deficit,

Accepted Answer

A) the nation must be experiencing a net capital inflow. 
B) the nation must be experiencing a net capital outflow. 
C) the nation's inflation rate must increase. 
D) the nation's interest rate must increase. 
A) the nation must be experiencing a net capital inflow. 
B) the nation must be experiencing a net capital outflow. 
C) the nation's inflation rate must increase. 
D) the nation's interest rate must increase.

Question 17

Within the aggregate demand/aggregate supply framework, the quantity produced and purchased in the goods and services market represents

Accepted Answer

A) nominal output or nominal GDP. 
B) the interest rate. 
C) real output or real GDP. 
D) the consumer price index. 
A) nominal output or nominal GDP. 
B) the interest rate. 
C) real output or real GDP. 
D) the consumer price index.

Question 18

Which of the following best characterizes the circular flow of income?

Accepted Answer

A) Households buy goods and services from businesses, and businesses sell goods and services to households. 
B) The government purchases resources from businesses and households and then sells goods and services to businesses and households. 
C) Businesses buy resources from the government, and households buy goods and services from businesses. 
D) Businesses buy resources from households, and households use their income to buy goods and services from businesses. 
A) Households buy goods and services from businesses, and businesses sell goods and services to households. 
B) The government purchases resources from businesses and households and then sells goods and services to businesses and households. 
C) Businesses buy resources from the government, and households buy goods and services from businesses. 
D) Businesses buy resources from households, and households use their income to buy goods and services from businesses.

Question 19

In the aggregate demand and aggregate supply model,

Accepted Answer

A) the factors that cause the individual demand curve to slope downward are the same as the factors that cause the aggregate demand curve to slope downward. 
B) the factors that cause the individual supply curve to slope upward are the same as the factors that cause the short-run aggregate supply curve to slope upward. 
C) the upward-sloping aggregate demand curve intersects the downward-sloping short-run aggregate supply curve to determine the economy's price level and GDP. 
D) the upward-sloping short-run aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP. 
A) the factors that cause the individual demand curve to slope downward are the same as the factors that cause the aggregate demand curve to slope downward. 
B) the factors that cause the individual supply curve to slope upward are the same as the factors that cause the short-run aggregate supply curve to slope upward. 
C) the upward-sloping aggregate demand curve intersects the downward-sloping short-run aggregate supply curve to determine the economy's price level and GDP. 
D) the upward-sloping short-run aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP.

Question 20

If the actual price level exceeds the expected price level reflected in long-term contracts,

Accepted Answer

A) firms will find production more profitable than they had expected and will decrease the quantity of output supplied 
B) firms will find production less profitable than they had expected and will decrease the quantity of output supplied 
C) firms will find production less profitable than they had expected and will increase the quantity of output supplied 
D) unemployment will decrease 
A) firms will find production more profitable than they had expected and will decrease the quantity of output supplied 
B) firms will find production less profitable than they had expected and will decrease the quantity of output supplied 
C) firms will find production less profitable than they had expected and will increase the quantity of output supplied 
D) unemployment will decrease

Which of the following provides the most accurate description of monetary policy?

If the expected rate of inflation is zero, the real interest rate must

The market for labor services is included in the

As the real interest rate in the domestic loanable funds market increases,

Which of the following will always be true when an economy is in long-run equilibrium?

As prices rise, people will buy fewer goods and services because

In the short run, if prices were above equilibrium,

A decrease in the dollar price of foreign currency would cause

Figure 9-1 -In Figure 9-1, which of the following correctly labels the curves in the aggregate demand/aggregate supply model?

Darius lent Alejandro $1,000 for one year with the understanding that Alejandro would repay $1,070. If the actual inflation rate was 7 percent, what was the real rate of interest Darius received?

The money interest rate may be a misleading indicator of real borrowing costs when

The international substitution effect exists because a

Within the framework of the AD/AS model, if a long-run equilibrium is present in the goods and services market,

When equilibrium is present, if market conditions do not change,

Use the figure below to answer the following question(s). Figure 9-2 -Which of the following is true for the economy depicted in Figure 9-2?

If equilibrium is present in the foreign exchange market and a nation is experiencing a trade deficit,

Within the aggregate demand/aggregate supply framework, the quantity produced and purchased in the goods and services market represents

Which of the following best characterizes the circular flow of income?

In the aggregate demand and aggregate supply model,

If the actual price level exceeds the expected price level reflected in long-term contracts,

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 9: An Introduction to Basic Macroeconomic Markets

Which of the following provides the most accurate description of monetary policy?

If the expected rate of inflation is zero, the real interest rate must

The market for labor services is included in the

As the real interest rate in the domestic loanable funds market increases,

Which of the following will always be true when an economy is in long-run equilibrium?

As prices rise, people will buy fewer goods and services because

In the short run, if prices were above equilibrium,

A decrease in the dollar price of foreign currency would cause

Figure 9-1 -In Figure 9-1, which of the following correctly labels the curves in the aggregate demand/aggregate supply model?

Darius lent Alejandro $1,000 for one year with the understanding that Alejandro would repay $1,070. If the actual inflation rate was 7 percent, what was the real rate of interest Darius received?

The money interest rate may be a misleading indicator of real borrowing costs when

The international substitution effect exists because a

Within the framework of the AD/AS model, if a long-run equilibrium is present in the goods and services market,

When equilibrium is present, if market conditions do not change,

Use the figure below to answer the following question(s). Figure 9-2 -Which of the following is true for the economy depicted in Figure 9-2?

If equilibrium is present in the foreign exchange market and a nation is experiencing a trade deficit,

Within the aggregate demand/aggregate supply framework, the quantity produced and purchased in the goods and services market represents

Which of the following best characterizes the circular flow of income?

In the aggregate demand and aggregate supply model,

If the actual price level exceeds the expected price level reflected in long-term contracts,

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters