Question 1

In the context of aggregate supply, the short 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

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 3

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.

Question 4

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 5

In the aggregate demand and aggregate supply model,

Accepted Answer

A)  the factors that cause the individual demand curve to slope downward are the same as the factors that cause the aggregate demand curve to slope downward. 
B)  the factors that cause the individual supply curve to slope upward are the same as the factors that cause the short-run aggregate supply curve to slope upward. 
C)  the upward-sloping aggregate demand curve intersects the downward-sloping short-run aggregate supply curve to determine the economy's price level and GDP. 
D)  the upward-sloping short-run aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP. 
A)  the factors that cause the individual demand curve to slope downward are the same as the factors that cause the aggregate demand curve to slope downward. 
B)  the factors that cause the individual supply curve to slope upward are the same as the factors that cause the short-run aggregate supply curve to slope upward. 
C)  the upward-sloping aggregate demand curve intersects the downward-sloping short-run aggregate supply curve to determine the economy's price level and GDP. 
D)  the upward-sloping short-run aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP.

Question 6

Other things constant, an increase in resource prices will

Accepted Answer

A)  increase the demand for goods and services. 
B)  increase the cost of producing goods and services, which will lead to a higher price level. 
C)  reduce costs and improve profit margins, which will lead to an increase in aggregate supply in the goods and services market. 
D)  cause the natural rate of unemployment to rise. 
A)  increase the demand for goods and services. 
B)  increase the cost of producing goods and services, which will lead to a higher price level. 
C)  reduce costs and improve profit margins, which will lead to an increase in aggregate supply in the goods and services market. 
D)  cause the natural rate of unemployment to rise.

Question 7

If people suddenly anticipate that inflation will rise during the next year, which of the following is most likely?

Accepted Answer

A)  Nominal interest rates will rise. 
B)  Nominal interest rates will decline. 
C)  The demand for goods and services will decline. 
D)  Both the real and nominal interest rates will decline. 
A)  Nominal interest rates will rise. 
B)  Nominal interest rates will decline. 
C)  The demand for goods and services will decline. 
D)  Both the real and nominal interest rates will decline.

Question 8

Use the figure below to answer the following question(s). Figure 9-2
  Figure 9-2 indicates that the output of the economy, y1, is

Accepted Answer

A)  greater than the economy's long-run capacity. 
B)  equal to the economy's long-run capacity. 
C)  less than the economy's long-run capacity. 
D)  in short-run equilibrium but not long-run equilibrium. 
A)  greater than the economy's long-run capacity. 
B)  equal to the economy's long-run capacity. 
C)  less than the economy's long-run capacity. 
D)  in short-run equilibrium but not long-run equilibrium.

Question 9

Use the figure below to answer the following question(s). Figure 9-2
  Which of the following is true for the economy depicted in Figure 9-2?

Accepted Answer

A)  Output equals potential real GDP. 
B)  The actual rate of unemployment equals the natural rate of unemployment. 
C)  The output is sustainable in the long run. 
D)  All of the above statements are true. 
A)  Output equals potential real GDP. 
B)  The actual rate of unemployment equals the natural rate of unemployment. 
C)  The output is sustainable in the long run. 
D)  All of the above statements are true.

Question 10

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 decline. 
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)  the inflationary premium will fall, and the money rate of interest will rise. 
A)  the cost of purchasing goods and services during the current period will decline. 
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)  the inflationary premium will fall, and the money rate of interest will rise.

Question 11

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 12

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

Accepted Answer

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

Question 13

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Accepted Answer

A)  the supply of loanable funds would shift right and investment would increase. 
B)  the supply of loanable funds would shift left and investment would decrease. 
C)  the demand for loanable funds would shift right and investment would increase. 
D)  the demand for loanable funds would shift left and investment would decrease. 
A)  the supply of loanable funds would shift right and investment would increase. 
B)  the supply of loanable funds would shift left and investment would decrease. 
C)  the demand for loanable funds would shift right and investment would increase. 
D)  the demand for loanable funds would shift left and investment would decrease.

Question 14

If the dollar depreciates relative to the Peso, it can be said that

Accepted Answer

A)  Mexican citizens no longer respect the United States. 
B)  the dollar falls in value within the United States. 
C)  it takes fewer dollars to buy Pesos. 
D)  the Peso appreciates relative to the dollar. 
A)  Mexican citizens no longer respect the United States. 
B)  the dollar falls in value within the United States. 
C)  it takes fewer dollars to buy Pesos. 
D)  the Peso appreciates relative to the dollar.

Question 15

If the nation's investment opportunities are highly attractive relative to those available abroad, the nation will tend to

Accepted Answer

A)  experience an outflow of capital and a trade deficit. 
B)  experience an outflow of capital and a trade surplus. 
C)  experience an inflow of capital and a trade deficit. 
D)  experience an inflow of capital and a trade surplus. 
A)  experience an outflow of capital and a trade deficit. 
B)  experience an outflow of capital and a trade surplus. 
C)  experience an inflow of capital and a trade deficit. 
D)  experience an inflow of capital and a trade surplus.

Question 16

If the dollar price of the English pound goes from $1.50 to $1.75, the dollar has

Accepted Answer

A)  appreciated, and Americans will find English goods cheaper. 
B)  appreciated, and Americans will find English goods more expensive. 
C)  depreciated, and Americans will find English goods cheaper. 
D)  depreciated, and Americans will find English goods more expensive. 
A)  appreciated, and Americans will find English goods cheaper. 
B)  appreciated, and Americans will find English goods more expensive. 
C)  depreciated, and Americans will find English goods cheaper. 
D)  depreciated, and Americans will find English goods more expensive.

Question 17

Americans needing foreign currencies get those currencies from a bank. The ultimate source of these currencies is

Accepted Answer

A)  U.S. investments abroad. 
B)  U.S. sales to foreign countries. 
C)  U.S. purchases of foreign goods, services, and assets. 
D)  the International Monetary Fund. 
A)  U.S. investments abroad. 
B)  U.S. sales to foreign countries. 
C)  U.S. purchases of foreign goods, services, and assets. 
D)  the International Monetary Fund.

Question 18

Darius lent Alejandro $1,000 for one year with the understanding that Alejandro would repay $1,070. If the actual inflation rate was 7 percent, what was the real rate of interest Darius received?

Accepted Answer

A)  14 percent 
B)  7 percent 
C)  4 percent 
D)  0 percent 
E)  −7 percent 
A)  14 percent 
B)  7 percent 
C)  4 percent 
D)  0 percent 
E)  −7 percent

Question 19

For a major country with extensive capital flows, what is the effect of a decrease 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 20

Controlling the money supply to achieve desired macroeconomic goals is called

Accepted Answer

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

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

The three reasons why the aggregate demand curve slopes downward are

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

In the aggregate demand and aggregate supply model,

Other things constant, an increase in resource prices will

If people suddenly anticipate that inflation will rise during the next year, which of the following is most likely?

Use the figure below to answer the following question(s). Figure 9-2 Figure 9-2 indicates that the output of the economy, y₁, is

Use the figure below to answer the following question(s). Figure 9-2 Which of the following is true for the economy depicted in Figure 9-2?

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

In the short run, an unexpected increase in prices will

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

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

If the dollar depreciates relative to the Peso, it can be said that

If the nation's investment opportunities are highly attractive relative to those available abroad, the nation will tend to

If the dollar price of the English pound goes from $1.50 to $1.75, the dollar has

Americans needing foreign currencies get those currencies from a bank. The ultimate source of these currencies is

Darius lent Alejandro $1,000 for one year with the understanding that Alejandro would repay $1,070. If the actual inflation rate was 7 percent, what was the real rate of interest Darius received?

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

Controlling the money supply to achieve desired macroeconomic goals is called

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 short run is defined as the period during which

The three reasons why the aggregate demand curve slopes downward are

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

In the aggregate demand and aggregate supply model,

Other things constant, an increase in resource prices will

If people suddenly anticipate that inflation will rise during the next year, which of the following is most likely?

Use the figure below to answer the following question(s). Figure 9-2 Figure 9-2 indicates that the output of the economy, y1, is

Use the figure below to answer the following question(s). Figure 9-2 Which of the following is true for the economy depicted in Figure 9-2?

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

In the short run, an unexpected increase in prices will

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

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

If the dollar depreciates relative to the Peso, it can be said that

If the nation's investment opportunities are highly attractive relative to those available abroad, the nation will tend to

If the dollar price of the English pound goes from $1.50 to $1.75, the dollar has

Americans needing foreign currencies get those currencies from a bank. The ultimate source of these currencies is

Darius lent Alejandro $1,000 for one year with the understanding that Alejandro would repay $1,070. If the actual inflation rate was 7 percent, what was the real rate of interest Darius received?

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

Controlling the money supply to achieve desired macroeconomic goals is called

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

Use the figure below to answer the following question(s). Figure 9-2 Figure 9-2 indicates that the output of the economy, y₁, is