Question 1

In the context of aggregate supply, the short run is defined as the period during which

Accepted Answer

A) some prices are set by contracts and cannot be adjusted. 
B) prices can change, but neither aggregate supply nor aggregate demand can shift. 
C) individuals have sufficient time to modify their behavior in response to price changes. 
D) quantity changes cannot occur in response to changes in relative prices. 
A) some prices are set by contracts and cannot be adjusted. 
B) prices can change, but neither aggregate supply nor aggregate demand can shift. 
C) individuals have sufficient time to modify their behavior in response to price changes. 
D) quantity changes cannot occur in response to changes in relative prices.

Question 2

The vertical long-run aggregate supply curve reflects the fact that in the long run, an increase in the price level

Accepted Answer

A) will not alter the economy's maximum sustainable rate of output. 
B) will increase the economy's maximum sustainable rate of output. 
C) will reduce the quantity of goods and services purchasers will demand. 
D) will improve the overall efficiency of resource use. 
A) will not alter the economy's maximum sustainable rate of output. 
B) will increase the economy's maximum sustainable rate of output. 
C) will reduce the quantity of goods and services purchasers will demand. 
D) will improve the overall efficiency of resource use.

Question 3

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

Accepted Answer

A) appreciated.Other things the same, the appreciation would make you less likely to travel to Mexico. 
B) appreciated.Other things the same, the appreciation would make you more likely to travel to Mexico. 
C) depreciated.Other things the same, the depreciation would make you less likely to travel to Mexico. 
D) depreciated.Other things the same, the depreciation would make you more likely to travel to Mexico. 
A) appreciated.Other things the same, the appreciation would make you less likely to travel to Mexico. 
B) appreciated.Other things the same, the appreciation would make you more likely to travel to Mexico. 
C) depreciated.Other things the same, the depreciation would make you less likely to travel to Mexico. 
D) depreciated.Other things the same, the depreciation would make you more likely to travel to Mexico.

Question 4

The real rate of interest is

Accepted Answer

A) interest paid by commercial banks. 
B) interest paid by the Fed. 
C) equal to the money rate of interest plus the inflationary premium. 
D) the money rate of interest adjusted for inflation. 
A) interest paid by commercial banks. 
B) interest paid by the Fed. 
C) equal to the money rate of interest plus the inflationary premium. 
D) the money rate of interest adjusted for inflation.

Question 5

Within the framework of the AD/AS model, when the current price level in the goods and services market is above the level anticipated at the time decision makers agreed to long-term resource contracts,

Accepted Answer

A) producer profits will fall, leading to a reduction in output. 
B) the natural rate of unemployment will rise. 
C) the actual rate of unemployment will fall below the natural rate of unemployment. 
D) output will be temporarily below the economy's long-run sustainable output. 
A) producer profits will fall, leading to a reduction in output. 
B) the natural rate of unemployment will rise. 
C) the actual rate of unemployment will fall below the natural rate of unemployment. 
D) output will be temporarily below the economy's long-run sustainable output.

Question 6

Which of the following is a correct statement?

Accepted Answer

A) Fiscal policy is the use of tax and spending policies by Congress and the president. 
B) Fiscal policy involves the control of the money supply by the Federal Reserve Bank. 
C) Monetary policy involves the control of the money supply by Congress and the president. 
D) Monetary policy is the use of tax and spending policies by the Federal Reserve Bank. 
A) Fiscal policy is the use of tax and spending policies by Congress and the president. 
B) Fiscal policy involves the control of the money supply by the Federal Reserve Bank. 
C) Monetary policy involves the control of the money supply by Congress and the president. 
D) Monetary policy is the use of tax and spending policies by the Federal Reserve Bank.

Question 7

If a lender expects inflation to be 5 percent, and after a loan is made, actual inflation is 10 percent, which of the following will be true?

Accepted Answer

A) The lender will receive a lower real interest rate than he expected. 
B) The loan will be repaid with dollars that are worth more than the lender expected. 
C) The nominal rate of interest can be expected to fall in the future. 
D) The lender will gain at the expense of the borrower. 
A) The lender will receive a lower real interest rate than he expected. 
B) The loan will be repaid with dollars that are worth more than the lender expected. 
C) The nominal rate of interest can be expected to fall in the future. 
D) The lender will gain at the expense of the borrower.

Question 8

An increase in the real interest rate will

Accepted Answer

A) lead to an increase in the expected inflation rate. 
B) increase the real cost of purchasing goods and services in the current period relative to future periods. 
C) encourage borrowers to demand a larger quantity of funds. 
D) reduce the quantity of funds supplied to the loanable funds market. 
A) lead to an increase in the expected inflation rate. 
B) increase the real cost of purchasing goods and services in the current period relative to future periods. 
C) encourage borrowers to demand a larger quantity of funds. 
D) reduce the quantity of funds supplied to the loanable funds market.

Question 9

Use the figure below to answer the following question(s).
Figure 9-2  
-When an economy is experiencing the aggregate demand and supply conditions depicted in Figure 9-2,

Accepted Answer

A) the actual rate of unemployment will exceed the natural rate of unemployment. 
B) buyers and sellers will have correctly anticipated the level of prices P1. 
C) the output y1 will not be sustainable in the future. 
D) all of the above are correct. 
A) the actual rate of unemployment will exceed the natural rate of unemployment. 
B) buyers and sellers will have correctly anticipated the level of prices P1. 
C) the output y1 will not be sustainable in the future. 
D) all of the above are correct.

Question 10

The aggregate demand curve indicates the relationship between

Accepted Answer

A) the real wage rate and the quality of resources demanded by producers of goods and services. 
B) the interest rate and the amount of loanable funds demanded by borrowers. 
C) the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium. 
D) the general price level and the aggregate quantity of goods and services demanded. 
A) the real wage rate and the quality of resources demanded by producers of goods and services. 
B) the interest rate and the amount of loanable funds demanded by borrowers. 
C) the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium. 
D) the general price level and the aggregate quantity of goods and services demanded.

Question 11

If the dollar price of the English pound goes from $1.30 to $1.10, the dollar has

Accepted Answer

A) appreciated, and the English will find U.S.goods cheaper. 
B) appreciated, and the English will find U.S.goods more expensive. 
C) depreciated, and the English will find U.S.goods cheaper. 
D) depreciated, and the English will find U.S.goods more expensive. 
A) appreciated, and the English will find U.S.goods cheaper. 
B) appreciated, and the English will find U.S.goods more expensive. 
C) depreciated, and the English will find U.S.goods cheaper. 
D) depreciated, and the English will find U.S.goods more expensive.

Question 12

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 be less than the natural rate of unemployment. 
D) output will exceed the economy's long-run sustainable output. 
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 be less than the natural rate of unemployment. 
D) output will exceed the economy's long-run sustainable output.

Question 13

When the loanable funds and foreign exchange markets are in equilibrium,

Accepted Answer

A) there are no leakages from the circular flow of income. 
B) macro equilibrium cannot occur. 
C) the leakages from the circular flow will equal the injections into it. 
D) injections into the circular flow will exceed leakages from it. 
A) there are no leakages from the circular flow of income. 
B) macro equilibrium cannot occur. 
C) the leakages from the circular flow will equal the injections into it. 
D) injections into the circular flow will exceed leakages from it.

Question 14

If expected inflation is constant and the nominal interest rate increased 3 percentage points, the real interest rate would

Accepted Answer

A) increase 3 percentage points. 
B) increase, but by less than 3 percentage points. 
C) decrease, but by less than 3 percentage points. 
D) decrease by 3 percentage points. 
A) increase 3 percentage points. 
B) increase, but by less than 3 percentage points. 
C) decrease, but by less than 3 percentage points. 
D) decrease by 3 percentage points.

Question 15

The supply of resources, level of technology, and the quality of an economy's institutional arrangements provide the constraint that determines the shape of the

Accepted Answer

A) short-run aggregate supply curve. 
B) long-run aggregate supply curve. 
C) supply of loanable funds. 
D) aggregate demand curve. 
A) short-run aggregate supply curve. 
B) long-run aggregate supply curve. 
C) supply of loanable funds. 
D) aggregate demand curve.

Question 16

Use the figure below to answer the following question(s).
Figure 9-2  
-When an economy is experiencing the aggregate demand and supply conditions depicted in Figure 9-2,

Accepted Answer

A) the actual rate of unemployment will equal the natural rate of unemployment. 
B) buyers and sellers will have correctly anticipated the level of prices P1. 
C) the output y1 will tend to persist into the future unless market conditions change. 
D) all of the above are correct. 
A) the actual rate of unemployment will equal the natural rate of unemployment. 
B) buyers and sellers will have correctly anticipated the level of prices P1. 
C) the output y1 will tend to persist into the future unless market conditions change. 
D) all of the above are correct.

Question 17

If prices in the United States rose, which of the following could be directly attributed to the international substitution effect?

Accepted Answer

A) Americans reduce their purchases of Japanese cars. 
B) Australians buy more American surfboards. 
C) Europeans purchase fewer American-made personal computers. 
D) Americans sell more wheat to India. 
A) Americans reduce their purchases of Japanese cars. 
B) Australians buy more American surfboards. 
C) Europeans purchase fewer American-made personal computers. 
D) Americans sell more wheat to India.

Question 18

The market that coordinates the exchange of productive inputs between the household and business sectors is the

Accepted Answer

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

Question 19

The macroeconomy is said to be in long-run equilibrium only if

Accepted Answer

A) the resource, loanable funds, foreign exchange, and goods and services markets are all in equilibrium. 
B) prices were incorrectly estimated by decision makers. 
C) the output of the economy exceeds the full-employment level of output. 
D) the economy is operating along its short-run aggregate supply curve. 
A) the resource, loanable funds, foreign exchange, and goods and services markets are all in equilibrium. 
B) prices were incorrectly estimated by decision makers. 
C) the output of the economy exceeds the full-employment level of output. 
D) the economy is operating along its short-run aggregate supply curve.

Question 20

Which of the following would generate a dollar demand for the euro?

Accepted Answer

A) American exports to Europe. 
B) European demand for U.S.government bonds. 
C) American demand for European real estate. 
D) All of the above are correct. 
A) American exports to Europe. 
B) European demand for U.S.government bonds. 
C) American demand for European real estate. 
D) All of the above are correct.

In the context of aggregate supply, the short run is defined as the period during which

The vertical long-run aggregate supply curve reflects the fact that in the long run, an increase in the price level

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

The real rate of interest is

Within the framework of the AD/AS model, when the current price level in the goods and services market is above the level anticipated at the time decision makers agreed to long-term resource contracts,

Which of the following is a correct statement?

If a lender expects inflation to be 5 percent, and after a loan is made, actual inflation is 10 percent, which of the following will be true?

An increase in the real interest rate will

Use the figure below to answer the following question(s). Figure 9-2 -When an economy is experiencing the aggregate demand and supply conditions depicted in Figure 9-2,

The aggregate demand curve indicates the relationship between

If the dollar price of the English pound goes from $1.30 to $1.10, the dollar has

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

When the loanable funds and foreign exchange markets are in equilibrium,

If expected inflation is constant and the nominal interest rate increased 3 percentage points, the real interest rate would

The supply of resources, level of technology, and the quality of an economy's institutional arrangements provide the constraint that determines the shape of the

Use the figure below to answer the following question(s). Figure 9-2 -When an economy is experiencing the aggregate demand and supply conditions depicted in Figure 9-2,

If prices in the United States rose, which of the following could be directly attributed to the international substitution effect?

The market that coordinates the exchange of productive inputs between the household and business sectors is the

The macroeconomy is said to be in long-run equilibrium only if

Which of the following would generate a dollar demand for the euro?

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

In the context of aggregate supply, the short run is defined as the period during which

The vertical long-run aggregate supply curve reflects the fact that in the long run, an increase in the price level

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

The real rate of interest is

Within the framework of the AD/AS model, when the current price level in the goods and services market is above the level anticipated at the time decision makers agreed to long-term resource contracts,

Which of the following is a correct statement?

If a lender expects inflation to be 5 percent, and after a loan is made, actual inflation is 10 percent, which of the following will be true?

An increase in the real interest rate will

Use the figure below to answer the following question(s). Figure 9-2 -When an economy is experiencing the aggregate demand and supply conditions depicted in Figure 9-2,

The aggregate demand curve indicates the relationship between

If the dollar price of the English pound goes from $1.30 to $1.10, the dollar has

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

When the loanable funds and foreign exchange markets are in equilibrium,

If expected inflation is constant and the nominal interest rate increased 3 percentage points, the real interest rate would

The supply of resources, level of technology, and the quality of an economy's institutional arrangements provide the constraint that determines the shape of the

Use the figure below to answer the following question(s). Figure 9-2 -When an economy is experiencing the aggregate demand and supply conditions depicted in Figure 9-2,

If prices in the United States rose, which of the following could be directly attributed to the international substitution effect?

The market that coordinates the exchange of productive inputs between the household and business sectors is the

The macroeconomy is said to be in long-run equilibrium only if

Which of the following would generate a dollar demand for the euro?

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