Question 1

Which of the following will be true when the foreign exchange market is in equilibrium and exports exceed imports?

Accepted Answer

A) The nation is experiencing a trade deficit. 
B) There will be a net inflow of capital. 
C) There will be a net outflow of capital. 
D) The exchange rate value of the domestic currency must rise. 
A) The nation is experiencing a trade deficit. 
B) There will be a net inflow of capital. 
C) There will be a net outflow of capital. 
D) The exchange rate value of the domestic currency must rise.

Question 2

Falling interest rates cause the market value of previously issued bonds to

Accepted Answer

A) rise. 
B) fall. 
C) remain unchanged. 
D) increase during periods of inflation but decline during periods of deflation. 
A) rise. 
B) fall. 
C) remain unchanged. 
D) increase during periods of inflation but decline during periods of deflation.

Question 3

Other things the same, when the interest rate rises

Accepted Answer

A) people would want to lend more, making the supply of loanable funds increase. 
B) people would want to lend less, making the supply of loanable funds decrease. 
C) people would want to lend more, making the quantity of loanable funds supplied increase. 
D) people would want to lend less, making the quantity of loanable funds supplied decrease. 
A) people would want to lend more, making the supply of loanable funds increase. 
B) people would want to lend less, making the supply of loanable funds decrease. 
C) people would want to lend more, making the quantity of loanable funds supplied increase. 
D) people would want to lend less, making the quantity of loanable funds supplied decrease.

Question 4

If the actual price level is lower than the expected price level reflected in long-term contracts,

Accepted Answer

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

Question 5

If a nation's currency depreciates, this will tend to

Accepted Answer

A) shift a nation's balance of trade toward a deficit. 
B) cause a deficit in the government's budget (expenditures - revenues). 
C) make foreign goods more expensive for the nation's citizens. 
D) make foreign goods cheaper for the nation's citizens. 
A) shift a nation's balance of trade toward a deficit. 
B) cause a deficit in the government's budget (expenditures - revenues). 
C) make foreign goods more expensive for the nation's citizens. 
D) make foreign goods cheaper for the nation's citizens.

Question 6

If the foreign exchange market is in equilibrium and attractive domestic investment opportunities result in a net inflow of capital,

Accepted Answer

A) the nation will experience a trade deficit. 
B) the nation will experience a trade surplus. 
C) interest rates will rise in the loanable funds market. 
D) the actual rate of unemployment must exceed the natural rate of unemployment. 
A) the nation will experience a trade deficit. 
B) the nation will experience a trade surplus. 
C) interest rates will rise in the loanable funds market. 
D) the actual rate of unemployment must exceed the natural rate of unemployment.

Question 7

If the actual price level is lower than the expected price level reflected in long-term contracts,

Accepted Answer

A) the actual rate of unemployment will be less than the natural rate of unemployment. 
B) the actual rate of unemployment will exceed the natural rate of unemployment. 
C) the natural rate of unemployment will rise. 
D) the natural rate of unemployment will fall. 
A) the actual rate of unemployment will be less than the natural rate of unemployment. 
B) the actual rate of unemployment will exceed the natural rate of unemployment. 
C) the natural rate of unemployment will rise. 
D) the natural rate of unemployment will fall.

Question 8

The short-run aggregate supply curve shows the relationship between

Accepted Answer

A) the general level of prices and the quantity of goods and services purchased by all consumers in the economy. 
B) the general level of prices and the quantity of goods and services that domestic firms will supply. 
C) the interest rate and the quantity of goods and services that domestic firms will supply. 
D) the money supply and the quantity of goods and services that domestic firms will supply. 
A) the general level of prices and the quantity of goods and services purchased by all consumers in the economy. 
B) the general level of prices and the quantity of goods and services that domestic firms will supply. 
C) the interest rate and the quantity of goods and services that domestic firms will supply. 
D) the money supply and the quantity of goods and services that domestic firms will supply.

Question 9

Imagine that there are only two nations in the world, the United States and Mexico. If Americans buy more goods made in Mexico, other things constant, the

Accepted Answer

A) U.S.demand curve for Mexican pesos will shift rightward 
B) U.S.demand curve for Mexican pesos will shift leftward 
C) U.S.supply curve of Mexican pesos will shift leftward 
D) U.S.supply curve of Mexican pesos will shift rightward 
A) U.S.demand curve for Mexican pesos will shift rightward 
B) U.S.demand curve for Mexican pesos will shift leftward 
C) U.S.supply curve of Mexican pesos will shift leftward 
D) U.S.supply curve of Mexican pesos will shift rightward

Question 10

Monetary policy can be most accurately described as

Accepted Answer

A) the use of government taxation and expenditures 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 deliberate control of the money supply to achieve macroeconomic goals. 
A) the use of government taxation and expenditures 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 deliberate control of the money supply to achieve macroeconomic goals.

Question 11

If there is shortage of loanable funds, then

Accepted Answer

A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium. 
A) the supply for loanable funds shifts right and the demand shifts left. 
B) the supply for loanable funds shifts left and the demand shifts right. 
C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

Question 12

When the economy is in macro equilibrium,

Accepted Answer

A) the sum of savings plus investment must equal the sum of imports plus exports. 
B) the sum of savings plus imports plus taxes must equal the sum of investment plus government purchases plus exports. 
C) the sum of savings plus government purchases must equal exports minus imports. 
D) the government's budget must be in balance. 
A) the sum of savings plus investment must equal the sum of imports plus exports. 
B) the sum of savings plus imports plus taxes must equal the sum of investment plus government purchases plus exports. 
C) the sum of savings plus government purchases must equal exports minus imports. 
D) the government's budget must be in balance.

Question 13

Which of the following basic economic concepts most clearly provides the foundation for the long-run aggregate supply curve?

Accepted Answer

A) the law of demand 
B) the production possibilities curve 
C) the law of comparative advantage 
D) the law of diminishing marginal utility 
A) the law of demand 
B) the production possibilities curve 
C) the law of comparative advantage 
D) the law of diminishing marginal utility

Question 14

For a major country with extensive capital flows, what is the effect of a decrease in interest rates?

Accepted Answer

A) There will be an inflow of capital, a currency depreciation, and increased net exports. 
B) There will be an inflow of capital, a currency depreciation, and reduced net exports. 
C) There will be an outflow of capital, a currency depreciation, and increased net exports. 
D) There will be an inflow of capital, a currency appreciation, and reduced net exports. 
A) There will be an inflow of capital, a currency depreciation, and increased net exports. 
B) There will be an inflow of capital, a currency depreciation, and reduced net exports. 
C) There will be an outflow of capital, a currency depreciation, and increased net exports. 
D) There will be an inflow of capital, a currency appreciation, and reduced net exports.

Question 15

A positive real interest rate indicates

Accepted Answer

A) how fast the number of dollars in your savings account is rising over time. 
B) how fast the purchasing power of your savings account is rising over time. 
C) the number of dollars in your savings account today. 
D) the purchasing power of your savings account today. 
A) how fast the number of dollars in your savings account is rising over time. 
B) how fast the purchasing power of your savings account is rising over time. 
C) the number of dollars in your savings account today. 
D) the purchasing power of your savings account today.

Question 16

Suppose that your bank pays 5 percent interest on your savings account balance. Is this the nominal or real interest rate? What would be your real interest rate?

Accepted Answer

This is the nominal interest r

Question 17

Within the framework of the AS/AD model, which of the following is a true statement regarding short-run aggregate supply?

Accepted Answer

A) An increase in prices temporarily improves profit margins because important components of costs are fixed in the short run. 
B) An increase in prices leads to higher interest rates, which temporarily improves profit margins. 
C) An increase in prices leads to an expansion in the money supply, which stimulates additional output. 
D) An increase in prices increases real wage rates and thereby expands the size of the economy's resource base. 
A) An increase in prices temporarily improves profit margins because important components of costs are fixed in the short run. 
B) An increase in prices leads to higher interest rates, which temporarily improves profit margins. 
C) An increase in prices leads to an expansion in the money supply, which stimulates additional output. 
D) An increase in prices increases real wage rates and thereby expands the size of the economy's resource base.

Question 18

Under what circumstances will inflation help borrowers at the expense of lenders? Under what circumstances will both parties be unaffected? Which scenario would you expect in the long run?

Accepted Answer

Only when inflation increases more than

Question 19

Other things the same, an increase in the price level makes the dollars people hold worth

Accepted Answer

A) more, so they are willing to spend more. 
B) more, so they are willing to spend less. 
C) less, so they are willing to spend more. 
D) less, so they are willing to spend less. 
A) more, so they are willing to spend more. 
B) more, so they are willing to spend less. 
C) less, so they are willing to spend more. 
D) less, so they are willing to spend less.

Question 20

Other things constant, an increase in the expected inflation rate will

Accepted Answer

A) decrease the inflationary premium. 
B) increase money (nominal) interest rates. 
C) increase the supply of loanable funds. 
D) decrease the money interest rate. 
A) decrease the inflationary premium. 
B) increase money (nominal) interest rates. 
C) increase the supply of loanable funds. 
D) decrease the money interest rate.

Which of the following will be true when the foreign exchange market is in equilibrium and exports exceed imports?

Falling interest rates cause the market value of previously issued bonds to

Other things the same, when the interest rate rises

If the actual price level is lower than the expected price level reflected in long-term contracts,

If a nation's currency depreciates, this will tend to

If the foreign exchange market is in equilibrium and attractive domestic investment opportunities result in a net inflow of capital,

If the actual price level is lower than the expected price level reflected in long-term contracts,

The short-run aggregate supply curve shows the relationship between

Imagine that there are only two nations in the world, the United States and Mexico. If Americans buy more goods made in Mexico, other things constant, the

Monetary policy can be most accurately described as

If there is shortage of loanable funds, then

When the economy is in macro equilibrium,

Which of the following basic economic concepts most clearly provides the foundation for the long-run aggregate supply curve?

For a major country with extensive capital flows, what is the effect of a decrease in interest rates?

A positive real interest rate indicates

Suppose that your bank pays 5 percent interest on your savings account balance. Is this the nominal or real interest rate? What would be your real interest rate?

Within the framework of the AS/AD model, which of the following is a true statement regarding short-run aggregate supply?

Under what circumstances will inflation help borrowers at the expense of lenders? Under what circumstances will both parties be unaffected? Which scenario would you expect in the long run?

Other things the same, an increase in the price level makes the dollars people hold worth

Other things constant, an increase in the expected inflation rate will

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 will be true when the foreign exchange market is in equilibrium and exports exceed imports?

Falling interest rates cause the market value of previously issued bonds to

Other things the same, when the interest rate rises

If the actual price level is lower than the expected price level reflected in long-term contracts,

If a nation's currency depreciates, this will tend to

If the foreign exchange market is in equilibrium and attractive domestic investment opportunities result in a net inflow of capital,

If the actual price level is lower than the expected price level reflected in long-term contracts,

The short-run aggregate supply curve shows the relationship between

Imagine that there are only two nations in the world, the United States and Mexico. If Americans buy more goods made in Mexico, other things constant, the

Monetary policy can be most accurately described as

If there is shortage of loanable funds, then

When the economy is in macro equilibrium,

Which of the following basic economic concepts most clearly provides the foundation for the long-run aggregate supply curve?

For a major country with extensive capital flows, what is the effect of a decrease in interest rates?

A positive real interest rate indicates

Suppose that your bank pays 5 percent interest on your savings account balance. Is this the nominal or real interest rate? What would be your real interest rate?

Within the framework of the AS/AD model, which of the following is a true statement regarding short-run aggregate supply?

Under what circumstances will inflation help borrowers at the expense of lenders? Under what circumstances will both parties be unaffected? Which scenario would you expect in the long run?

Other things the same, an increase in the price level makes the dollars people hold worth

Other things constant, an increase in the expected inflation rate will

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