Question 1

In the context of aggregate supply, the long 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

Which of the following would generate a supply of euros in exchange for dollars?

Accepted Answer

A)  American demand for European real estate. 
B)  European demand for U.S. government bonds. 
C)  Americans vacationing in Europe. 
D)  Purchase of French wines by U.S. importers. 
A)  American demand for European real estate. 
B)  European demand for U.S. government bonds. 
C)  Americans vacationing in Europe. 
D)  Purchase of French wines by U.S. importers.

Question 3

A positive nominal 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 in 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 in your savings account today.

Question 4

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 5

Of the following, who would most likely be hurt by an unanticipated increase in the rate of inflation?

Accepted Answer

A)  an individual with a 30-year fixed-rate home mortgage loan 
B)  the U.S. federal government because it has a large quantity of outstanding debt 
C)  lenders who have made long-term loans at fixed interest rates 
D)  Social Security recipients whose benefits are adjusted upward as the general level of prices increases 
A)  an individual with a 30-year fixed-rate home mortgage loan 
B)  the U.S. federal government because it has a large quantity of outstanding debt 
C)  lenders who have made long-term loans at fixed interest rates 
D)  Social Security recipients whose benefits are adjusted upward as the general level of prices increases

Question 6

If a person earns an 8 percent nominal rate of interest on his savings account in a year when inflation is 9 percent, the person's real rate of interest is

Accepted Answer

A)  −1 percent. 
B)  1 percent. 
C)  8 percent. 
D)  9 percent. 
A)  −1 percent. 
B)  1 percent. 
C)  8 percent. 
D)  9 percent.

Question 7

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 8

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 9

Which of the following events would cause the interest rate to rise?

Accepted Answer

A)  a decrease in the demand for loanable funds 
B)  an increase in the demand for loanable funds 
C)  an increase in the supply for loanable funds 
D)  a decrease in aggregate demand 
A)  a decrease in the demand for loanable funds 
B)  an increase in the demand for loanable funds 
C)  an increase in the supply for loanable funds 
D)  a decrease in aggregate demand

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 a shortage of loanable funds, then

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 12

Other things equal, which of the following is true?

Accepted Answer

A)  A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B)  A reduction in prices will lead to a decline in net exports. 
C)  A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D)  A reduction in prices will increase profit margins and, thereby, stimulate additional investment. 
A)  A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B)  A reduction in prices will lead to a decline in net exports. 
C)  A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D)  A reduction in prices will increase profit margins and, thereby, stimulate additional investment.

Question 13

People will spend more if the price level

Accepted Answer

A)  rises because rising prices increase the real value of the fixed quantity of money. 
B)  rises because rising prices decrease the real value of a dollar. 
C)  falls because falling prices increase the real value of a dollar. 
D)  falls because falling prices decrease the real value of a dollar. 
A)  rises because rising prices increase the real value of the fixed quantity of money. 
B)  rises because rising prices decrease the real value of a dollar. 
C)  falls because falling prices increase the real value of a dollar. 
D)  falls because falling prices decrease the real value of a dollar.

Question 14

A firm's level of investment is tied to the interest rate

Accepted Answer

A)  only when the firm has to borrow funds to buy capital 
B)  only when the firm has to borrow funds to buy stocks 
C)  only when the firm already has the funds and could lend them 
D)  because the interest rate represents the opportunity cost of investing in capital 
E)  because investments are always made with borrowed funds 
A)  only when the firm has to borrow funds to buy capital 
B)  only when the firm has to borrow funds to buy stocks 
C)  only when the firm already has the funds and could lend them 
D)  because the interest rate represents the opportunity cost of investing in capital 
E)  because investments are always made with borrowed funds

Question 15

Which of the following helps explain why the aggregate quantity demanded of goods and services is inversely related to prices within the framework of the AD/AS model?

Accepted Answer

A)  As prices fall, domestic consumers have an incentive to buy less of the cheaper goods and services. 
B)  As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the quantity of goods and services purchased. 
C)  As prices fall, the government will have to reduce taxes, which will lead to an increase in the quantity of goods and services purchased. 
D)  As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services. 
A)  As prices fall, domestic consumers have an incentive to buy less of the cheaper goods and services. 
B)  As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the quantity of goods and services purchased. 
C)  As prices fall, the government will have to reduce taxes, which will lead to an increase in the quantity of goods and services purchased. 
D)  As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services.

Question 16

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.

Question 17

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 18

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 19

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 20

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.

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

Which of the following would generate a supply of euros in exchange for dollars?

A positive nominal interest rate indicates

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

Of the following, who would most likely be hurt by an unanticipated increase in the rate of inflation?

If a person earns an 8 percent nominal rate of interest on his savings account in a year when inflation is 9 percent, the person's real rate of interest is

Other things the same, when the interest rate rises

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

Which of the following events would cause the interest rate to rise?

Monetary policy can be most accurately described as

If there is a shortage of loanable funds, then

Other things equal, which of the following is true?

People will spend more if the price level

A firm's level of investment is tied to the interest rate

Which of the following helps explain why the aggregate quantity demanded of goods and services is inversely related to prices within the framework of the AD/AS model?

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

The exchange rate is

When the economy is in macro equilibrium,

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

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,

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

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

Which of the following would generate a supply of euros in exchange for dollars?

A positive nominal interest rate indicates

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

Of the following, who would most likely be hurt by an unanticipated increase in the rate of inflation?

If a person earns an 8 percent nominal rate of interest on his savings account in a year when inflation is 9 percent, the person's real rate of interest is

Other things the same, when the interest rate rises

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

Which of the following events would cause the interest rate to rise?

Monetary policy can be most accurately described as

If there is a shortage of loanable funds, then

Other things equal, which of the following is true?

People will spend more if the price level

A firm's level of investment is tied to the interest rate

Which of the following helps explain why the aggregate quantity demanded of goods and services is inversely related to prices within the framework of the AD/AS model?

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

The exchange rate is

When the economy is in macro equilibrium,

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

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,

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