Question 1

Figure 9-3  
-The three reasons why the aggregate demand curve slopes downward are

Accepted Answer

A) the international substitution effect, the net exports effect and the interest rate effect. 
B) the interest rate effect, the short run effect and the free rider effect 
C) the net exports effect, the real balance effect and the short run effect 
D) the real balance effect, the international substitution effect and the interest rate effect. 
A) the international substitution effect, the net exports effect and the interest rate effect. 
B) the interest rate effect, the short run effect and the free rider effect 
C) the net exports effect, the real balance effect and the short run effect 
D) the real balance effect, the international substitution effect and the interest rate effect.

Question 2

The real rate of interest equals the

Accepted Answer

A) money rate of interest minus the expected inflation rate. 
B) money rate of interest plus the expected inflation rate. 
C) inflationary premium. 
D) nominal rate of interest. 
A) money rate of interest minus the expected inflation rate. 
B) money rate of interest plus the expected inflation rate. 
C) inflationary premium. 
D) nominal rate of interest.

Question 3

Figure 9-3  
-Suppose that U.S. tastes for British goods increase. Then, in Figure 9-3

Accepted Answer

A) the supply curve shifts from S1 to S2 
B) the supply curve shifts from S2 to S1 
C) the demand curve shifts from D2 to D1 
D) the demand curve shifts from D1 to D2 
E) both demand and supply shift to the right 
A) the supply curve shifts from S1 to S2 
B) the supply curve shifts from S2 to S1 
C) the demand curve shifts from D2 to D1 
D) the demand curve shifts from D1 to D2 
E) both demand and supply shift to the right

Question 4

Long-run equilibrium in the goods and services market requires that decision makers who agreed to long-term contracts must have

Accepted Answer

A) incorrectly anticipated the level of prices when they made the agreements. 
B) correctly anticipated the level of prices when they made the agreements. 
C) correctly anticipated the natural rate of unemployment when they made the agreements. 
D) correctly anticipated actual GDP when they made the agreements. 
A) incorrectly anticipated the level of prices when they made the agreements. 
B) correctly anticipated the level of prices when they made the agreements. 
C) correctly anticipated the natural rate of unemployment when they made the agreements. 
D) correctly anticipated actual GDP when they made the agreements.

Question 5

As the dollar appreciates, which of the following is most likely to occur?

Accepted Answer

A) More Americans will travel abroad. 
B) American imports will fall. 
C) More foreigners will visit the United States. 
D) American firms will reduce their investments abroad. 
A) More Americans will travel abroad. 
B) American imports will fall. 
C) More foreigners will visit the United States. 
D) American firms will reduce their investments abroad.

Question 6

How does the aggregate goods and services market differ from the regular supply and demand graph in Chapter 3? Address the measures of price, quantity, and the demand and supply curve(s).

Accepted Answer

In the aggregate goods and services mark

Question 7

Output in the goods and services market will be sustained into the future

Accepted Answer

A) if aggregate demand and short-run aggregate supply are in balance. 
B) only when the prior choices of decision makers were based on a correct anticipation of prices. 
C) only when prices are rising. 
D) only when wage rates are declining. 
A) if aggregate demand and short-run aggregate supply are in balance. 
B) only when the prior choices of decision makers were based on a correct anticipation of prices. 
C) only when prices are rising. 
D) only when wage rates are declining.

Question 8

Other things the same, a decrease 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 9

In 2000, a major U.S. oil company began exploration off the southeastern coast of the United States. Suppose the company discovers huge reserves of natural gas. Using the aggregate demand/ aggregate supply model, predict what shifts will occur and what will happen to output and prices in both the long and short runs.

Accepted Answer

The discovery of natural gas reserves wi

Question 10

Answer the following questions:
a.What is a bond?
b.If bonds make fixed payments every year, explain how a reduction in market interest rates will increase the price of the bond in the market.

Accepted Answer

a.
A bond is an IOU that allows firms or

Question 11

Which of the following would generally cause firms to expand output in the short run?

Accepted Answer

A) a proportional increase in the prices of goods and services and the costs of producing them 
B) higher profit margins as the result of an unexpected increase in the prices of goods and services 
C) an unexpected reduction in aggregate demand 
D) an increase in wages and the prices of other resources 
A) a proportional increase in the prices of goods and services and the costs of producing them 
B) higher profit margins as the result of an unexpected increase in the prices of goods and services 
C) an unexpected reduction in aggregate demand 
D) an increase in wages and the prices of other resources

Question 12

The change in the quantity of goods and services demanded in the U.S. is based on the logic that as the price level rises,

Accepted Answer

A) real wealth falls, interest rates rise, and net exports fall. 
B) real wealth falls, interest rates rise, and net exports rise. 
C) real wealth rises, interest rates fall, and net exports fall. 
D) real wealth rises, interest rates fall, and net exports rise. 
A) real wealth falls, interest rates rise, and net exports fall. 
B) real wealth falls, interest rates rise, and net exports rise. 
C) real wealth rises, interest rates fall, and net exports fall. 
D) real wealth rises, interest rates fall, and net exports rise.

Question 13

Saving is

Accepted Answer

A) the sum of the funds people hold in their checking accounts. 
B) after-tax income that is not spent on consumption. 
C) always equal to consumption. 
D) equal to disposable income plus consumption. 
A) the sum of the funds people hold in their checking accounts. 
B) after-tax income that is not spent on consumption. 
C) always equal to consumption. 
D) equal to disposable income plus consumption.

Question 14

A positive level of net exports contributes directly to

Accepted Answer

A) demand in the resources market. 
B) supply in the loanable funds market. 
C) demand in the loanable funds market. 
D) demand in the goods and services market. 
A) demand in the resources market. 
B) supply in the loanable funds market. 
C) demand in the loanable funds market. 
D) demand in the goods and services market.

Question 15

If the price level in the current period is higher than what buyers and sellers anticipated,

Accepted Answer

A) profit margins will be unattractive and firms will expand output. 
B) profit margins will be unattractive and firms will reduce output. 
C) profit margins will be attractive and firms will expand output. 
D) profit margins will be attractive and firms will reduce output. 
A) profit margins will be unattractive and firms will expand output. 
B) profit margins will be unattractive and firms will reduce output. 
C) profit margins will be attractive and firms will expand output. 
D) profit margins will be attractive and firms will reduce output.

Question 16

When an economy operates at its long-run potential output level,

Accepted Answer

A) aggregate demand will exceed aggregate supply in the goods and services market. 
B) unemployment will decline to an abnormally low rate that cannot be sustained in the long run. 
C) the actual rate of unemployment will exceed the natural rate of unemployment. 
D) the natural and actual rates of unemployment will be equal. 
A) aggregate demand will exceed aggregate supply in the goods and services market. 
B) unemployment will decline to an abnormally low rate that cannot be sustained in the long run. 
C) the actual rate of unemployment will exceed the natural rate of unemployment. 
D) the natural and actual rates of unemployment will be equal.

Question 17

If the money interest rate is 7 percent and the inflationary premium 4 percent, the real interest rate is

Accepted Answer

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

Question 18

As the dollar depreciates, which of the following is most likely to occur?

Accepted Answer

A) More Americans will travel abroad. 
B) American imports will rise. 
C) More foreigners will visit the United States. 
D) American firms will increase their investments abroad. 
A) More Americans will travel abroad. 
B) American imports will rise. 
C) More foreigners will visit the United States. 
D) American firms will increase their investments abroad.

Question 19

In the short run, an unexpected increase in prices will

Accepted Answer

A) reduce resource prices and increase the quantity of goods supplied. 
B) decrease the productive capacity of firms and decrease the quantity of goods supplied. 
C) increase the profits of firms, thereby leading them to expand output. 
D) increase the profits of firms, thereby leading them to reduce output. 
A) reduce resource prices and increase the quantity of goods supplied. 
B) decrease the productive capacity of firms and decrease the quantity of goods supplied. 
C) increase the profits of firms, thereby leading them to expand output. 
D) increase the profits of firms, thereby leading them to reduce output.

Question 20

An unanticipated reduction in the level of prices in the goods and services market, which results in a temporary increase in real wage rates, will

Accepted Answer

A) increase the natural rate of unemployment. 
B) reduce the natural rate of unemployment. 
C) result in an actual rate of unemployment that is less than the natural rate of unemployment. 
D) result in an actual rate of unemployment that is greater than the natural rate of unemployment. 
A) increase the natural rate of unemployment. 
B) reduce the natural rate of unemployment. 
C) result in an actual rate of unemployment that is less than the natural rate of unemployment. 
D) result in an actual rate of unemployment that is greater than the natural rate of unemployment.

Figure 9-3 -The three reasons why the aggregate demand curve slopes downward are

The real rate of interest equals the

Figure 9-3 -Suppose that U.S. tastes for British goods increase. Then, in Figure 9-3

Long-run equilibrium in the goods and services market requires that decision makers who agreed to long-term contracts must have

As the dollar appreciates, which of the following is most likely to occur?

How does the aggregate goods and services market differ from the regular supply and demand graph in Chapter 3? Address the measures of price, quantity, and the demand and supply curve(s).

Output in the goods and services market will be sustained into the future

Other things the same, a decrease in the price level makes the dollars people hold worth

Answer the following questions: a.What is a bond? b.If bonds make fixed payments every year, explain how a reduction in market interest rates will increase the price of the bond in the market.

Which of the following would generally cause firms to expand output in the short run?

The change in the quantity of goods and services demanded in the U.S. is based on the logic that as the price level rises,

Saving is

A positive level of net exports contributes directly to

If the price level in the current period is higher than what buyers and sellers anticipated,

When an economy operates at its long-run potential output level,

If the money interest rate is 7 percent and the inflationary premium 4 percent, the real interest rate is

As the dollar depreciates, which of the following is most likely to occur?

In the short run, an unexpected increase in prices will

An unanticipated reduction in the level of prices in the goods and services market, which results in a temporary increase in real wage rates, 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

Figure 9-3 -The three reasons why the aggregate demand curve slopes downward are

The real rate of interest equals the

Figure 9-3 -Suppose that U.S. tastes for British goods increase. Then, in Figure 9-3

Long-run equilibrium in the goods and services market requires that decision makers who agreed to long-term contracts must have

As the dollar appreciates, which of the following is most likely to occur?

How does the aggregate goods and services market differ from the regular supply and demand graph in Chapter 3? Address the measures of price, quantity, and the demand and supply curve(s).

Output in the goods and services market will be sustained into the future

Other things the same, a decrease in the price level makes the dollars people hold worth

Answer the following questions: a.What is a bond? b.If bonds make fixed payments every year, explain how a reduction in market interest rates will increase the price of the bond in the market.

Which of the following would generally cause firms to expand output in the short run?

The change in the quantity of goods and services demanded in the U.S. is based on the logic that as the price level rises,

Saving is

A positive level of net exports contributes directly to

If the price level in the current period is higher than what buyers and sellers anticipated,

When an economy operates at its long-run potential output level,

If the money interest rate is 7 percent and the inflationary premium 4 percent, the real interest rate is

As the dollar depreciates, which of the following is most likely to occur?

In the short run, an unexpected increase in prices will

An unanticipated reduction in the level of prices in the goods and services market, which results in a temporary increase in real wage rates, 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