Question 1

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 2

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 3

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

Accepted Answer

A)  There will be an inflow of capital, a currency depreciation, and increased net exports. 
B)  There will be an inflow of capital, a currency depreciation, and reduced net exports. 
C)  There will be an outflow of capital, a currency depreciation, and increased net exports. 
D)  There will be an inflow of capital, a currency appreciation, and reduced net exports. 
A)  There will be an inflow of capital, a currency depreciation, and increased net exports. 
B)  There will be an inflow of capital, a currency depreciation, and reduced net exports. 
C)  There will be an outflow of capital, a currency depreciation, and increased net exports. 
D)  There will be an inflow of capital, a currency appreciation, and reduced net exports.

Question 4

Which of the following basic economic concepts most clearly provides the foundation for the long-run aggregate supply curve?

Accepted Answer

A)  the law of demand 
B)  the production possibilities curve 
C)  the law of comparative advantage 
D)  the law of diminishing marginal utility 
A)  the law of demand 
B)  the production possibilities curve 
C)  the law of comparative advantage 
D)  the law of diminishing marginal utility

Question 5

The inflationary premium is that portion of the interest rate that reflects

Accepted Answer

A)  the real return derived by lenders. 
B)  the rush to buy goods before prices rise. 
C)  the expected annual rate of decline in the purchasing power of money while a loan is outstanding. 
D)  the price that one must pay for earlier availability of goods and services during a period of price stability. 
A)  the real return derived by lenders. 
B)  the rush to buy goods before prices rise. 
C)  the expected annual rate of decline in the purchasing power of money while a loan is outstanding. 
D)  the price that one must pay for earlier availability of goods and services during a period of price stability.

Question 6

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 7

Which of the following properly describes the interest-rate effect of aggregate demand?

Accepted Answer

A)  A higher price level leads to higher money demand, higher money demand leads to higher interest rates, a higher interest rate increases the quantity of goods and services demanded. 
B)  A higher price level leads to higher money demand, higher money demand leads to lower interest rates, a higher interest rate reduces the quantity of goods and services demanded. 
C)  A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate reduces the quantity of goods and services demanded. 
D)  A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate increases the quantity of goods and services demanded. 
A)  A higher price level leads to higher money demand, higher money demand leads to higher interest rates, a higher interest rate increases the quantity of goods and services demanded. 
B)  A higher price level leads to higher money demand, higher money demand leads to lower interest rates, a higher interest rate reduces the quantity of goods and services demanded. 
C)  A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate reduces the quantity of goods and services demanded. 
D)  A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate increases the quantity of goods and services demanded.

Question 8

Fiscal policy is

Accepted Answer

A)  the deliberate control of the money supply to achieve macroeconomic goals. 
B)  the use of the government's regulatory powers to improve economic efficiency. 
C)  the operation of business enterprises by the government. 
D)  the use of government taxation and expenditures to achieve macroeconomic goals. 
A)  the deliberate control of the money supply to achieve macroeconomic goals. 
B)  the use of the government's regulatory powers to improve economic efficiency. 
C)  the operation of business enterprises by the government. 
D)  the use of government taxation and expenditures to achieve macroeconomic goals.

Question 9

When the exchange rate is determined by market forces and an economy is experiencing a net inflow of capital, the economy will tend to

Accepted Answer

A)  run a budget deficit. 
B)  run a trade deficit. 
C)  experience an increase in the supply of money. 
D)  experience a reduction in the supply of money. 
A)  run a budget deficit. 
B)  run a trade deficit. 
C)  experience an increase in the supply of money. 
D)  experience a reduction in the supply of money.

Question 10

If a reform of the tax laws encourages greater saving, the result would be

Accepted Answer

A)  higher interest rates and greater investment. 
B)  higher interest rates and less investment. 
C)  lower interest rates and greater investment. 
D)  lower interest rate and less investment. 
A)  higher interest rates and greater investment. 
B)  higher interest rates and less investment. 
C)  lower interest rates and greater investment. 
D)  lower interest rate and less investment.

Question 11

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 12

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 13

The four key markets that coordinate the circular flow of income are

Accepted Answer

A)  goods and services, resources, loanable funds, and foreign exchange. 
B)  consumption, investment, stock, and government. 
C)  government, household goods, bond, and business. 
D)  financial, corporate, stock, and loanable funds. 
A)  goods and services, resources, loanable funds, and foreign exchange. 
B)  consumption, investment, stock, and government. 
C)  government, household goods, bond, and business. 
D)  financial, corporate, stock, and loanable funds.

Question 14

Other things the same, an increase 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 15

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 16

Which of the following provides the most accurate description of monetary policy?

Accepted Answer

A)  the deliberate control of the money supply 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 use of government taxation and expenditures to achieve macroeconomic goals 
A)  the deliberate control of the money supply 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 use of government taxation and expenditures to achieve macroeconomic goals

Question 17

In the short run, if prices were above equilibrium,

Accepted Answer

A)  excess aggregate demand for goods and services would place downward pressure on prices. 
B)  excess aggregate supply of goods and services would place upward pressure on prices. 
C)  excess aggregate demand for goods and services would place upward pressure on prices. 
D)  excess aggregate supply of goods and services would place downward pressure on prices. 
A)  excess aggregate demand for goods and services would place downward pressure on prices. 
B)  excess aggregate supply of goods and services would place upward pressure on prices. 
C)  excess aggregate demand for goods and services would place upward pressure on prices. 
D)  excess aggregate supply of goods and services would place downward pressure on prices.

Question 18

If there is shortage 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 19

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 20

Which of the following is most likely to increase the net inflow of foreign capital?

Accepted Answer

A)  an increase in the rate of inflation 
B)  a decline in real GDP as the economy falls into a recession 
C)  a reduction in domestic investment 
D)  an increase in the real interest rate in the loanable funds market 
A)  an increase in the rate of inflation 
B)  a decline in real GDP as the economy falls into a recession 
C)  a reduction in domestic investment 
D)  an increase in the real interest rate in the loanable funds market

The real rate of interest equals the

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

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

Which of the following basic economic concepts most clearly provides the foundation for the long-run aggregate supply curve?

The inflationary premium is that portion of the interest rate that reflects

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

Which of the following properly describes the interest-rate effect of aggregate demand?

Fiscal policy is

When the exchange rate is determined by market forces and an economy is experiencing a net inflow of capital, the economy will tend to

If a reform of the tax laws encourages greater saving, the result would be

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

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

The four key markets that coordinate the circular flow of income are

Other things the same, an increase in the price level makes the dollars people hold worth

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

Which of the following provides the most accurate description of monetary policy?

In the short run, if prices were above equilibrium,

If there is shortage of loanable funds, then

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

Which of the following is most likely to increase the net inflow of foreign capital?

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

The real rate of interest equals the

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

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

Which of the following basic economic concepts most clearly provides the foundation for the long-run aggregate supply curve?

The inflationary premium is that portion of the interest rate that reflects

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

Which of the following properly describes the interest-rate effect of aggregate demand?

Fiscal policy is

When the exchange rate is determined by market forces and an economy is experiencing a net inflow of capital, the economy will tend to

If a reform of the tax laws encourages greater saving, the result would be

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

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

The four key markets that coordinate the circular flow of income are

Other things the same, an increase in the price level makes the dollars people hold worth

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

Which of the following provides the most accurate description of monetary policy?

In the short run, if prices were above equilibrium,

If there is shortage of loanable funds, then

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

Which of the following is most likely to increase the net inflow of foreign capital?

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