Question 1

As the general price level in an economy rises, the aggregate quantity demanded of goods and services falls because

Accepted Answer

A)  the prices of domestic goods have risen relative to foreign goods, causing exports to fall and imports to rise. 
B)  higher interest rates caused by an increase in the demand for money balances causes a reduction in current investment and consumption. 
C)  the value of money will fall, reducing the real wealth and, thus, the consumption of persons holding money balances. 
D)  all of the above are correct. 
A)  the prices of domestic goods have risen relative to foreign goods, causing exports to fall and imports to rise. 
B)  higher interest rates caused by an increase in the demand for money balances causes a reduction in current investment and consumption. 
C)  the value of money will fall, reducing the real wealth and, thus, the consumption of persons holding money balances. 
D)  all of the above are correct. D

Question 2

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 rate. The real interest rate would be the 5 percent minus the rate of inflation.

Question 3

If net exports are negative, 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. D

Question 4

A decrease in the dollar price of the English pound will make

Accepted Answer

A)  U.S. exports to England increase. 
B)  U.S. exports less expensive for the English. 
C)  imports from England more expensive for Americans. 
D)  U.S. exports to England decrease. 
A)  U.S. exports to England increase. 
B)  U.S. exports less expensive for the English. 
C)  imports from England more expensive for Americans. 
D)  U.S. exports to England decrease.

Question 5

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 6

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 7

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 8

Other things constant, a decrease in resource prices will lead to

Accepted Answer

A)  reduced profits and a reduction in short-run aggregate supply. 
B)  increased profits and a reduction in short-run aggregate supply. 
C)  reduced profits and an increase in short-run aggregate supply. 
D)  increased profits and an increase in short-run aggregate supply. 
A)  reduced profits and a reduction in short-run aggregate supply. 
B)  increased profits and a reduction in short-run aggregate supply. 
C)  reduced profits and an increase in short-run aggregate supply. 
D)  increased profits and an increase in short-run aggregate supply.

Question 9

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)  an increase in the interest rate will  increase the aggregate quantity of goods and services demanded. 
D)  consumers purchase more domestic-made goods and fewer foreign-made goods as  the prices of domestic goods increase. 
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)  an increase in the interest rate will  increase the aggregate quantity of goods and services demanded. 
D)  consumers purchase more domestic-made goods and fewer foreign-made goods as  the prices of domestic goods increase.

Question 10

Which of the following helps explain why the aggregate demand curve slopes downward?

Accepted Answer

A)  If the price level increases, the purchasing power of the fixed quantity of money decreases, causing people to buy less. 
B)  If the price level increases, the purchasing power of the fixed quantity of money increases, causing people to buy more. 
C)  If domestic prices increase, we substitute domestic goods for imported goods. 
D)  If domestic prices decrease, we substitute imported goods for domestic goods. 
A)  If the price level increases, the purchasing power of the fixed quantity of money decreases, causing people to buy less. 
B)  If the price level increases, the purchasing power of the fixed quantity of money increases, causing people to buy more. 
C)  If domestic prices increase, we substitute domestic goods for imported goods. 
D)  If domestic prices decrease, we substitute imported goods for domestic goods.

Question 11

Long-run equilibrium in the goods and services market requires that

Accepted Answer

A)  aggregate supply equals aggregate demand and that decision makers correctly anticipate the level of prices. 
B)  the unemployment rate is zero. 
C)  prices are neither increasing nor decreasing. 
D)  aggregate supply be larger than aggregate demand. 
A)  aggregate supply equals aggregate demand and that decision makers correctly anticipate the level of prices. 
B)  the unemployment rate is zero. 
C)  prices are neither increasing nor decreasing. 
D)  aggregate supply be larger than aggregate demand.

Question 12

If for some reason Americans wished to purchase more foreign assets, then other things the same

Accepted Answer

A)  both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall. 
B)  both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise. 
C)  the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall. 
D)  the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise. 
A)  both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall. 
B)  both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise. 
C)  the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall. 
D)  the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.

Question 13

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 14

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 15

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 16

When the foreign exchange market is in equilibrium, which of the following will be true?

Accepted Answer

A)  imports + exports = net capital inflow 
B)  imports − exports = net capital inflow 
C)  imports − budget deficit = net savings 
D)  imports + investment = exports + savings 
A)  imports + exports = net capital inflow 
B)  imports − exports = net capital inflow 
C)  imports − budget deficit = net savings 
D)  imports + investment = exports + savings

Question 17

If the U.S. demand for British pounds increases,

Accepted Answer

A)  the dollar price of a British pound will increase 
B)  the dollar price of a British pound will decrease 
C)  the exchange rate between dollars and pounds will be out of equilibrium 
D)  the pound will fall in value against the dollar 
E)  there will be no change in either the value of the dollar or the pound 
A)  the dollar price of a British pound will increase 
B)  the dollar price of a British pound will decrease 
C)  the exchange rate between dollars and pounds will be out of equilibrium 
D)  the pound will fall in value against the dollar 
E)  there will be no change in either the value of the dollar or the pound

Question 18

The difference between the money rate of interest and the real rate of interest is often called the

Accepted Answer

A)  real balance effect. 
B)  prime interest rate. 
C)  inflationary premium. 
D)  discount rate. 
A)  real balance effect. 
B)  prime interest rate. 
C)  inflationary premium. 
D)  discount rate.

Question 19

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 20

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.

As the general price level in an economy rises, the aggregate quantity demanded of goods and services falls because

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?

If net exports are negative, then

A decrease in the dollar price of the English pound will make

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

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

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

Other things constant, a decrease in resource prices will lead to

The aggregate demand curve slopes downward indicating that

Which of the following helps explain why the aggregate demand curve slopes downward?

Long-run equilibrium in the goods and services market requires that

If for some reason Americans wished to purchase more foreign assets, then other things the same

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).

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

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,

When the foreign exchange market is in equilibrium, which of the following will be true?

If the U.S. demand for British pounds increases,

The difference between the money rate of interest and the real rate of interest is often called the

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

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

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

Special Topics

Filters

Exam 9: An Introduction to Basic Macroeconomic Markets

As the general price level in an economy rises, the aggregate quantity demanded of goods and services falls because

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?

If net exports are negative, then

A decrease in the dollar price of the English pound will make

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

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

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

Other things constant, a decrease in resource prices will lead to

The aggregate demand curve slopes downward indicating that

Which of the following helps explain why the aggregate demand curve slopes downward?

Long-run equilibrium in the goods and services market requires that

If for some reason Americans wished to purchase more foreign assets, then other things the same

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).

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

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,

When the foreign exchange market is in equilibrium, which of the following will be true?

If the U.S. demand for British pounds increases,

The difference between the money rate of interest and the real rate of interest is often called the

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

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

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

Special Topics

Filters