Question 1

Which of the following is a correct statement?

Accepted Answer

A) Fiscal policy is the use of tax and spending policies by Congress and the president. 
B) Fiscal policy involves the control of the money supply by the Federal Reserve Bank. 
C) Monetary policy involves the control of the money supply by Congress and the president. 
D) Monetary policy is the use of tax and spending policies by the Federal Reserve Bank. 
A) Fiscal policy is the use of tax and spending policies by Congress and the president. 
B) Fiscal policy involves the control of the money supply by the Federal Reserve Bank. 
C) Monetary policy involves the control of the money supply by Congress and the president. 
D) Monetary policy is the use of tax and spending policies by the Federal Reserve Bank.

Question 2

Which of the following situations would you prefer if you planned to borrow money?

Accepted Answer

A) The nominal interest rate is 5 percent,and future prices are expected to be stable. 
B) The nominal interest rate is 9 percent,and expected inflation is 7 percent. 
C) The nominal interest rate is 4 percent,and expected inflation is 1 percent. 
D) The nominal interest rate is 25 percent,and expected inflation is 22 percent. 
A) The nominal interest rate is 5 percent,and future prices are expected to be stable. 
B) The nominal interest rate is 9 percent,and expected inflation is 7 percent. 
C) The nominal interest rate is 4 percent,and expected inflation is 1 percent. 
D) The nominal interest rate is 25 percent,and expected inflation is 22 percent.

Question 3

In the foreign exchange market,the price of one nation's currency in terms of the currency of another nation is known as the

Accepted Answer

A) inflation rate. 
B) wage rate. 
C) interest rate. 
D) exchange rate. 
A) inflation rate. 
B) wage rate. 
C) interest rate. 
D) exchange rate.

Question 4

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 5

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 6

Which of the following explains why higher prices in the goods and services market will lead to an upward sloping short-run aggregate supply curve?

Accepted Answer

A) The higher prices will temporarily improve profit margins because many of the cost components of firms will be fixed in the short run. 
B) The higher prices will reduce the purchasing power of the fixed quantity of money and,thereby,stimulate additional output. 
C) The higher prices will expand the economy's resource base and,thereby,stimulate additional output. 
D) The higher prices will improve technology and,thereby,stimulate additional output. 
A) The higher prices will temporarily improve profit margins because many of the cost components of firms will be fixed in the short run. 
B) The higher prices will reduce the purchasing power of the fixed quantity of money and,thereby,stimulate additional output. 
C) The higher prices will expand the economy's resource base and,thereby,stimulate additional output. 
D) The higher prices will improve technology and,thereby,stimulate additional output.

Question 7

During a period of persistent inflation,

Accepted Answer

A) borrowers will systematically gain at the expense of lenders. 
B) nominal interest rates will rise and eventually reflect the expected rate of inflation. 
C) once borrowers and lenders fully anticipate the inflation rate,there is no reason to expect that either will systematically gain relative to the other. 
D) both b and c are correct. 
A) borrowers will systematically gain at the expense of lenders. 
B) nominal interest rates will rise and eventually reflect the expected rate of inflation. 
C) once borrowers and lenders fully anticipate the inflation rate,there is no reason to expect that either will systematically gain relative to the other. 
D) both b and c are correct.

Question 8

Other things constant,a decrease in aggregate demand will

Accepted Answer

A) lead to a decrease in the demand for resources. 
B) cause an increase in the general level of prices. 
C) result in higher nominal wage rates. 
D) reduce the rate of unemployment. 
A) lead to a decrease in the demand for resources. 
B) cause an increase in the general level of prices. 
C) result in higher nominal wage rates. 
D) reduce the rate of unemployment.

Question 9

If there is a surplus of loanable funds

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 10

The aggregate demand curve is downward sloping because

Accepted Answer

A) an increase in the price level will cause an increase in spending on goods and services. 
B) at lower price levels,real wealth decreases,causing a decrease in the quantity demanded of goods and services. 
C) at lower price levels,interest rates increase,causing a decrease in the quantity demanded of goods and services. 
D) at lower price levels,net exports increase,causing an increase in quantity demanded of goods and services. 
A) an increase in the price level will cause an increase in spending on goods and services. 
B) at lower price levels,real wealth decreases,causing a decrease in the quantity demanded of goods and services. 
C) at lower price levels,interest rates increase,causing a decrease in the quantity demanded of goods and services. 
D) at lower price levels,net exports increase,causing an increase in quantity demanded of goods and services.

Question 11

A positive real 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 of 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 of your savings account today.

Question 12

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

Accepted Answer

A) decrease the natural rate of unemployment. 
B) increase 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) decrease the natural rate of unemployment. 
B) increase 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.

Question 13

The macroeconomy is said to be in long-run equilibrium only if

Accepted Answer

A) the resource,loanable funds,foreign exchange,and goods and services markets are all in equilibrium. 
B) prices were incorrectly estimated by decision makers. 
C) the output of the economy exceeds the full-employment level of output. 
D) the economy is operating along its short-run aggregate supply curve. 
A) the resource,loanable funds,foreign exchange,and goods and services markets are all in equilibrium. 
B) prices were incorrectly estimated by decision makers. 
C) the output of the economy exceeds the full-employment level of output. 
D) the economy is operating along its short-run aggregate supply curve.

Question 14

The resource market involves transactions dealing with

Accepted Answer

A) natural resources and financial services. 
B) the borrowing and lending of financial capital. 
C) the buying and selling of final goods and services. 
D) labor services,natural resources,and physical capital. 
A) natural resources and financial services. 
B) the borrowing and lending of financial capital. 
C) the buying and selling of final goods and services. 
D) labor services,natural resources,and physical capital.

Question 15

In the loanable funds market,the price that borrowers must pay for earlier availability is the

Accepted Answer

A) inflation rate. 
B) wage rate. 
C) interest rate. 
D) exchange rate. 
A) inflation rate. 
B) wage rate. 
C) interest rate. 
D) exchange rate.

Question 16

An unexpected sharp reduction in inflation will most likely result in

Accepted Answer

A) the rapid growth of output and employment. 
B) a reduction in the actual rate of unemployment. 
C) a reduction in the natural rate of unemployment. 
D) a temporary increase in unemployment and a decline in real output. 
A) the rapid growth of output and employment. 
B) a reduction in the actual rate of unemployment. 
C) a reduction in the natural rate of unemployment. 
D) a temporary increase in unemployment and a decline in real output.

Question 17

From 1994 to 1999,inflation in the United States was relatively constant at approximately 2.5 percent.When inflation is constant for an extended period,which of the following is most likely?

Accepted Answer

A) People will correctly anticipate the actual inflation rate,and the actual rate of unemployment will approach the natural rate of unemployment. 
B) People will correctly anticipate the actual inflation rate,and the actual rate of unemployment will exceed the natural rate of unemployment. 
C) The actual inflation rate will be greater than the anticipated rate,leading to an actual rate of unemployment that exceeds the natural rate of unemployment. 
D) Actual inflation will be less than the anticipated rate,leading to an actual rate of unemployment that exceeds the natural rate of unemployment. 
A) People will correctly anticipate the actual inflation rate,and the actual rate of unemployment will approach the natural rate of unemployment. 
B) People will correctly anticipate the actual inflation rate,and the actual rate of unemployment will exceed the natural rate of unemployment. 
C) The actual inflation rate will be greater than the anticipated rate,leading to an actual rate of unemployment that exceeds the natural rate of unemployment. 
D) Actual inflation will be less than the anticipated rate,leading to an actual rate of unemployment that exceeds the natural rate of unemployment.

Question 18

If equilibrium is present in the foreign exchange market and a nation is experiencing a trade deficit,

Accepted Answer

A) the nation must be experiencing a net capital inflow. 
B) the nation must be experiencing a net capital outflow. 
C) the nation's inflation rate must increase. 
D) the nation's interest rate must increase. 
A) the nation must be experiencing a net capital inflow. 
B) the nation must be experiencing a net capital outflow. 
C) the nation's inflation rate must increase. 
D) the nation's interest rate must increase.

Question 19

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 20

When prices rise,consumers and businesses hold larger money balances.This reduces the supply of loanable funds,increases the interest rate,and discourages both consumption and investment.This process is called the

Accepted Answer

A) interest rate effect. 
B) real balance effect. 
C) investment effect. 
D) disinvestment effect. 
A) interest rate effect. 
B) real balance effect. 
C) investment effect. 
D) disinvestment effect.

Exam 9: Aan Introduction to Basic Macroeconomic Markets

Which of the following is a correct statement?

Which of the following situations would you prefer if you planned to borrow money?

In the foreign exchange market,the price of one nation's currency in terms of the currency of another nation is known as the

Other things constant,an increase in resource prices will

In the short run,if prices were above equilibrium,

Which of the following explains why higher prices in the goods and services market will lead to an upward sloping short-run aggregate supply curve?

During a period of persistent inflation,

Other things constant,a decrease in aggregate demand will

If there is a surplus of loanable funds

The aggregate demand curve is downward sloping because

A positive real interest rate indicates

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

The macroeconomy is said to be in long-run equilibrium only if

The resource market involves transactions dealing with

In the loanable funds market,the price that borrowers must pay for earlier availability is the

An unexpected sharp reduction in inflation will most likely result in

From 1994 to 1999,inflation in the United States was relatively constant at approximately 2.5 percent.When inflation is constant for an extended period,which of the following is most likely?

If equilibrium is present in the foreign exchange market and a nation is experiencing a trade deficit,

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

When prices rise,consumers and businesses hold larger money balances.This reduces the supply of loanable funds,increases the interest rate,and discourages both consumption and investment.This process is called the

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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