Question 1

If net exports are positive, then

Accepted Answer

A) net capital outflow is positive (indicating an inflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B) net capital outflow is positive (indicating an inflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C) net capital outflow is negative (indicating an outflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D) net capital outflow is negative (indicating an outflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans. 
A) net capital outflow is positive (indicating an inflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B) net capital outflow is positive (indicating an inflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C) net capital outflow is negative (indicating an outflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D) net capital outflow is negative (indicating an outflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans.

Question 2

Which of the following is the most accurate statement about real and nominal interest rates?

Accepted Answer

A) Real interest rates can be either positive or negative, but nominal interest rates must be positive. 
B) Real interest rates and nominal interest rates must be positive. 
C) Real interest rates must be positive, but nominal interest rates can be either positive or negative. 
D) Real interest rates and nominal interest rates can be either positive or negative. 
A) Real interest rates can be either positive or negative, but nominal interest rates must be positive. 
B) Real interest rates and nominal interest rates must be positive. 
C) Real interest rates must be positive, but nominal interest rates can be either positive or negative. 
D) Real interest rates and nominal interest rates can be either positive or negative.

Question 3

A vertical long-run aggregate supply curve indicates that

Accepted Answer

A) an increase in the price level will not expand an economy's output capacity in the long run. 
B) outputs greater than the long-run supply constraint cannot be achieved. 
C) an increase in the price level will permit the economy to achieve a higher level of output. 
D) an increase in the price level will promote technological change and more rapid economic growth. 
A) an increase in the price level will not expand an economy's output capacity in the long run. 
B) outputs greater than the long-run supply constraint cannot be achieved. 
C) an increase in the price level will permit the economy to achieve a higher level of output. 
D) an increase in the price level will promote technological change and more rapid economic growth.

Question 4

Which of the following is the most accurate statement about nominal and real interest rates?

Accepted Answer

A) Nominal and real interest rates always move together. 
B) Nominal and real interest rates never move together. 
C) Nominal and real interest rates often do not move together. 
D) Nominal and real interest rates always move in opposite directions. 
A) Nominal and real interest rates always move together. 
B) Nominal and real interest rates never move together. 
C) Nominal and real interest rates often do not move together. 
D) Nominal and real interest rates always move in opposite directions.

Question 5

The aggregate demand curve slopes downward indicating that

Accepted Answer

A) an increase in the general price level will reduce the aggregate quantity of goods and services demanded. 
B) an increase in the general price level will increase the aggregate quantity of goods and services demanded. 
C) a change in the interest rate will alter the aggregate quantity of goods and services demanded. 
D) consumers substitute between domestic-made and foreign-made goods as their relative prices change. 
A) an increase in the general price level will reduce the aggregate quantity of goods and services demanded. 
B) an increase in the general price level will increase the aggregate quantity of goods and services demanded. 
C) a change in the interest rate will alter the aggregate quantity of goods and services demanded. 
D) consumers substitute between domestic-made and foreign-made goods as their relative prices change.

Question 6

The portion of after-tax income a consumer does not spend on consumption is called

Accepted Answer

A) investment. 
B) saving. 
C) supply. 
D) temporary income. 
A) investment. 
B) saving. 
C) supply. 
D) temporary income.

Question 7

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

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 8

Suppose the nominal interest rate was 5 percent and the inflation rate was 3.5 percent.

Accepted Answer

A) The dollar value of savings increased at 1.5 percent, and the value of savings measured in goods increased at 3.5 percent. 
B) The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 1.5 percent. 
C) The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 5 percent. 
D) The dollar value of savings increased at 5 percent, and the value of savings measured in goods increased at 1.5 percent. 
A) The dollar value of savings increased at 1.5 percent, and the value of savings measured in goods increased at 3.5 percent. 
B) The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 1.5 percent. 
C) The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 5 percent. 
D) The dollar value of savings increased at 5 percent, and the value of savings measured in goods increased at 1.5 percent.

Question 9

The use of government taxation and expenditures to achieve macroeconomic goals is called

Accepted Answer

A) cyclical policy. 
B) monetary policy. 
C) fiscal policy. 
D) industrial policy. 
A) cyclical policy. 
B) monetary policy. 
C) fiscal policy. 
D) industrial policy.

Question 10

Why do we use two supply curves in the aggregate goods and services market? What is the difference between them, and why do they have different slopes?

Accepted Answer

Aggregate supply is divided into two sup

Question 11

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 decrease. 
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) a trade surplus will occur. 
A) the cost of purchasing goods and services during the current period will decrease. 
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) a trade surplus will occur.

Question 12

The exchange rate is

Accepted Answer

A) the price of one nation's currency in terms of the currency of another nation. 
B) the amount households will spend on imports. 
C) the amount of foreign capital a nation receives when there is a trade surplus. 
D) the amount charged by bankers for loanable funds 
A) the price of one nation's currency in terms of the currency of another nation. 
B) the amount households will spend on imports. 
C) the amount of foreign capital a nation receives when there is a trade surplus. 
D) the amount charged by bankers for loanable funds

Question 13

People anticipate inflation will be 3 percent during the next several years. If this is true, when the real interest rate is 4 percent, the money interest rate will be

Accepted Answer

A) 1 percent. 
B) 3 percent. 
C) 4 percent. 
D) 7 percent. 
A) 1 percent. 
B) 3 percent. 
C) 4 percent. 
D) 7 percent.

Question 14

The money rate of interest will be less than the real rate of interest when decision makers anticipate

Accepted Answer

A) stable prices in the future. 
B) falling prices in the future. 
C) inflation in the future. 
D) that the money rate of interest will decline. 
A) stable prices in the future. 
B) falling prices in the future. 
C) inflation in the future. 
D) that the money rate of interest will decline.

Question 15

Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market?

Accepted Answer

A) The U.S.overall demand for foreign exchange, and British pounds, in particular, will increase. 
B) The U.S.overall demand for foreign exchange, and British pounds, in particular, will decrease. 
C) The U.S.demand for British pounds will increase, but the overall demand for foreign exchange will probably decrease. 
D) The U.S.demand for British pounds will decrease, but the overall demand for foreign exchange will probably increase. 
A) The U.S.overall demand for foreign exchange, and British pounds, in particular, will increase. 
B) The U.S.overall demand for foreign exchange, and British pounds, in particular, will decrease. 
C) The U.S.demand for British pounds will increase, but the overall demand for foreign exchange will probably decrease. 
D) The U.S.demand for British pounds will decrease, but the overall demand for foreign exchange will probably increase.

Question 16

If the quantity supplied of euro were greater than the quantity demanded, then the price of the

Accepted Answer

A) euro would rise. 
B) euro would fall. 
C) dollar would fall. 
D) euro would be in equilibrium. 
A) euro would rise. 
B) euro would fall. 
C) dollar would fall. 
D) euro would be in equilibrium.

Question 17

If there is surplus 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 18

If there is a surplus of loanable funds

Accepted Answer

A) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium. 
A) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.

Question 19

Which of the following is necessarily true when an economy is in long-run equilibrium?

Accepted Answer

A) Prices will be constant (that is, inflation will be zero). 
B) The actual output will be less than the full-employment (or potential) output. 
C) The actual rate of unemployment equals the natural rate of unemployment. 
D) The output of the economy will be greater than the full-employment output. 
A) Prices will be constant (that is, inflation will be zero). 
B) The actual output will be less than the full-employment (or potential) output. 
C) The actual rate of unemployment equals the natural rate of unemployment. 
D) The output of the economy will be greater than the full-employment output.

Question 20

Suppose people expect inflation to be 3 percent during the next several years. When the real interest rate is 5 percent, the money, or nominal interest rate, will be

Accepted Answer

A) 1 percent. 
B) 4 percent. 
C) 7 percent. 
D) 8 percent. 
A) 1 percent. 
B) 4 percent. 
C) 7 percent. 
D) 8 percent.

If net exports are positive, then

Which of the following is the most accurate statement about real and nominal interest rates?

A vertical long-run aggregate supply curve indicates that

Which of the following is the most accurate statement about nominal and real interest rates?

The aggregate demand curve slopes downward indicating that

The portion of after-tax income a consumer does not spend on consumption is called

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

Suppose the nominal interest rate was 5 percent and the inflation rate was 3.5 percent.

The use of government taxation and expenditures to achieve macroeconomic goals is called

Why do we use two supply curves in the aggregate goods and services market? What is the difference between them, and why do they have different slopes?

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

The exchange rate is

People anticipate inflation will be 3 percent during the next several years. If this is true, when the real interest rate is 4 percent, the money interest rate will be

The money rate of interest will be less than the real rate of interest when decision makers anticipate

Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market?

If the quantity supplied of euro were greater than the quantity demanded, then the price of the

If there is surplus of loanable funds, then

If there is a surplus of loanable funds

Which of the following is necessarily true when an economy is in long-run equilibrium?

Suppose people expect inflation to be 3 percent during the next several years. When the real interest rate is 5 percent, the money, or nominal interest rate, will be

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

If net exports are positive, then

Which of the following is the most accurate statement about real and nominal interest rates?

A vertical long-run aggregate supply curve indicates that

Which of the following is the most accurate statement about nominal and real interest rates?

The aggregate demand curve slopes downward indicating that

The portion of after-tax income a consumer does not spend on consumption is called

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

Suppose the nominal interest rate was 5 percent and the inflation rate was 3.5 percent.

The use of government taxation and expenditures to achieve macroeconomic goals is called

Why do we use two supply curves in the aggregate goods and services market? What is the difference between them, and why do they have different slopes?

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

The exchange rate is

People anticipate inflation will be 3 percent during the next several years. If this is true, when the real interest rate is 4 percent, the money interest rate will be

The money rate of interest will be less than the real rate of interest when decision makers anticipate

Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market?

If the quantity supplied of euro were greater than the quantity demanded, then the price of the

If there is surplus of loanable funds, then

If there is a surplus of loanable funds

Which of the following is necessarily true when an economy is in long-run equilibrium?

Suppose people expect inflation to be 3 percent during the next several years. When the real interest rate is 5 percent, the money, or nominal interest rate, will be

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