Question 1

When AD is equal to SRAS at an output level equal to the LRAS curve,

Accepted Answer

A) we are at long-run macroeconomic equilibrium. 
B) we are at the natural rate of unemployment. 
C) both a and b are true. 
D) neither a nor b is true. 
A) we are at long-run macroeconomic equilibrium. 
B) we are at the natural rate of unemployment. 
C) both a and b are true. 
D) neither a nor b is true.

Question 2

What are the three reasons why the aggregate demand curve slopes downward? Give an example of each.

Accepted Answer

The real balance effect occurs because a

Question 3

The nominal (money)rate of interest

Accepted Answer

A) is the real rate of interest plus the inflationary premium. 
B) can be expected to decline as inflation accelerates. 
C) fell to historic lows during the 1970s when the United States experienced double-digit rates of inflation. 
D) can be expected to increase when the government is running a budget surplus. 
A) is the real rate of interest plus the inflationary premium. 
B) can be expected to decline as inflation accelerates. 
C) fell to historic lows during the 1970s when the United States experienced double-digit rates of inflation. 
D) can be expected to increase when the government is running a budget surplus.

Question 4

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 5

Because many resource prices are set by long-term contracts,in the short run

Accepted Answer

A) costs will increase by more than product prices when demand increases. 
B) costs will decrease when the demand for products increases. 
C) costs will increase by less than product prices when demand increases. 
D) costs will decrease by more than product prices when demand decreases. 
A) costs will increase by more than product prices when demand increases. 
B) costs will decrease when the demand for products increases. 
C) costs will increase by less than product prices when demand increases. 
D) costs will decrease by more than product prices when demand decreases.

Question 6

If the dollar price of the English pound goes from $1.75 to $1.50,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 7

Which of the following will always be true when an economy is in long-run equilibrium?

Accepted Answer

A) The level of prices will be constant (that is,inflation will be zero). 
B) Actual output will exceed the potential output. 
C) The actual rate of unemployment will be less than the natural rate of unemployment. 
D) The output of the economy will correspond with the full-employment output. 
A) The level of prices will be constant (that is,inflation will be zero). 
B) Actual output will exceed the potential output. 
C) The actual rate of unemployment will be less than the natural rate of unemployment. 
D) The output of the economy will correspond with the full-employment output.

Question 8

If the current price level in the goods and services market is higher than what was expected,output will be

Accepted Answer

A) at the economy's long-run capacity. 
B) below the economy's long-run capacity. 
C) above the economy's long-run capacity. 
D) equal to the expected rate of inflation minus net exports. 
A) at the economy's long-run capacity. 
B) below the economy's long-run capacity. 
C) above the economy's long-run capacity. 
D) equal to the expected rate of inflation minus net exports.

Question 9

Once decision makers fully adjust to an increase in prices,

Accepted Answer

A) the natural rate of unemployment will decline. 
B) competitive forces will restore the usual relationship between product prices and costs. 
C) producers' profits will exceed their normal level. 
D) producers will expand output beyond the economy's potential. 
A) the natural rate of unemployment will decline. 
B) competitive forces will restore the usual relationship between product prices and costs. 
C) producers' profits will exceed their normal level. 
D) producers will expand output beyond the economy's potential.

Question 10

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) Potential output exceeds Y₁. 
B) When output Y₁ is achieved,the actual rate of unemployment will exceed the natural rate of unemployment. 
C) When output Y₁ is achieved,the actual rate of unemployment will be less than the natural rate of unemployment. 
D) When output Y₁ is achieved,the actual rate of unemployment will equal the economy's natural rate of unemployment. 
A) Potential output exceeds Y₁. 
B) When output Y₁ is achieved,the actual rate of unemployment will exceed the natural rate of unemployment. 
C) When output Y₁ is achieved,the actual rate of unemployment will be less than the natural rate of unemployment. 
D) When output Y₁ is achieved,the actual rate of unemployment will equal the economy's natural rate of unemployment.

Question 11

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 12

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 13

Use the figure below to answer the following question(s).
Figure 9-2
  
-The output of the economy depicted in Figure 9-2 is

Accepted Answer

A) equal to the full-employment output. 
B) greater than the full-employment output. 
C) less than the full-employment output. 
D) not sustainable in the long run. 
A) equal to the full-employment output. 
B) greater than the full-employment output. 
C) less than the full-employment output. 
D) not sustainable in the long run.

Question 14

If resource prices are fixed and the product selling price rises,then

Accepted Answer

A) profits will decrease. 
B) profits will increase. 
C) profits will remain constant. 
D) both profits and output will decrease. 
A) profits will decrease. 
B) profits will increase. 
C) profits will remain constant. 
D) both profits and output will decrease.

Question 15

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 16

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 17

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 18

Which of the following are leakages from the circular flow of income?

Accepted Answer

A) Savings,taxes,and imports 
B) Investment,government purchases,and exports 
C) Investment,taxes and bonds 
D) Imports,wages and taxes 
A) Savings,taxes,and imports 
B) Investment,government purchases,and exports 
C) Investment,taxes and bonds 
D) Imports,wages and taxes

Question 19

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.

Question 20

If the dollar price of the English pound goes from $1.80 to $1.40,the dollar has

Accepted Answer

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

Exam 9: Aan Introduction to Basic Macroeconomic Markets

When AD is equal to SRAS at an output level equal to the LRAS curve,

What are the three reasons why the aggregate demand curve slopes downward? Give an example of each.

The nominal (money)rate of interest

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

Because many resource prices are set by long-term contracts,in the short run

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

Which of the following will always be true when an economy is in long-run equilibrium?

If the current price level in the goods and services market is higher than what was expected,output will be

Once decision makers fully adjust to an increase in prices,

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?

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

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 -The output of the economy depicted in Figure 9-2 is

If resource prices are fixed and the product selling price rises,then

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

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

Other things the same,when the interest rate rises

Which of the following are leakages from the circular flow of income?

Controlling the money supply to achieve desired macroeconomic goals is called

If the dollar price of the English pound goes from $1.80 to $1.40,the dollar has

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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