Question 1

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 2

Answer the following questions:
a.What is a bond?
b.If bonds make fixed payments every year,explain how a reduction in market interest rates will increase the price of the bond in the market.

Accepted Answer

a.A bond is an IOU that allows firms or

Question 3

Which of the following is true regarding an unanticipated increase in inflation?

Accepted Answer

A) Both borrowers and lenders will be better off. 
B) Both borrowers and lenders will be worse off. 
C) Borrowers will be better off and lenders will be worse off. 
D) Borrowers will be worse off and lenders will be better off. 
A) Both borrowers and lenders will be better off. 
B) Both borrowers and lenders will be worse off. 
C) Borrowers will be better off and lenders will be worse off. 
D) Borrowers will be worse off and lenders will be better off.

Question 4

The actions of borrowers and lenders are coordinated by

Accepted Answer

A) the interest rate in the loanable funds market. 
B) the government in the resources market. 
C) businesses in the resources market. 
D) the interest rate in the goods and services market. 
A) the interest rate in the loanable funds market. 
B) the government in the resources market. 
C) businesses in the resources market. 
D) the interest rate in the goods and services market.

Question 5

Which of the following will most likely result from a decline in the dollar price of a foreign currency?

Accepted Answer

A) an increase in the inflation rate 
B) Foreign goods will become more expensive,and therefore,U.S.imports will decline. 
C) U.S.exports will be cheaper for foreigners,and therefore,they will increase. 
D) U.S.exports will become more expensive for foreigners,and therefore,they will decrease. 
A) an increase in the inflation rate 
B) Foreign goods will become more expensive,and therefore,U.S.imports will decline. 
C) U.S.exports will be cheaper for foreigners,and therefore,they will increase. 
D) U.S.exports will become more expensive for foreigners,and therefore,they will decrease.

Question 6

The price of one country's currency in terms of another's is called

Accepted Answer

A) the interest rate. 
B) the inflationary premium. 
C) the discount rate. 
D) the exchange rate. 
A) the interest rate. 
B) the inflationary premium. 
C) the discount rate. 
D) the exchange rate.

Question 7

Other things constant,a decrease in resource prices will lead to

Accepted Answer

A) reduced profits and a reduction in short-run aggregate supply. 
B) increased profits and a reduction in short-run aggregate supply. 
C) reduced profits and an increase in short-run aggregate supply. 
D) increased profits and an increase in short-run aggregate supply. 
A) reduced profits and a reduction in short-run aggregate supply. 
B) increased profits and a reduction in short-run aggregate supply. 
C) reduced profits and an increase in short-run aggregate supply. 
D) increased profits and an increase in short-run aggregate supply.

Question 8

If a U.S.dollar exchanges for 10 Mexican Pesos,the dollar price of a Peso is

Accepted Answer

A) 10 cents. 
B) 90 cents. 
C) $1. 
D) $10. 
A) 10 cents. 
B) 90 cents. 
C) $1. 
D) $10.

Question 9

The circular flow of income is coordinated by the

Accepted Answer

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

Question 10

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 11

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 equals Y₁. 
B) It would be impossible for this economy to achieve an output greater than Y₁. 
C) When output Y₁ is achieved,the actual rate of unemployment will exceed the natural rate of unemployment. 
D) When output Y₁ is achieved,the actual rate of unemployment will be less than the natural rate of unemployment. 
A) Potential output equals Y₁. 
B) It would be impossible for this economy to achieve an output greater than Y₁. 
C) When output Y₁ is achieved,the actual rate of unemployment will exceed the natural rate of unemployment. 
D) When output Y₁ is achieved,the actual rate of unemployment will be less than the natural rate of unemployment.

Question 12

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 13

A depreciation of a nation's currency would cause

Accepted Answer

A) the nation's imports to increase and exports to decline. 
B) the nation's exports to increase and imports to decline. 
C) both imports and exports to decline. 
D) both imports and exports to rise. 
A) the nation's imports to increase and exports to decline. 
B) the nation's exports to increase and imports to decline. 
C) both imports and exports to decline. 
D) both imports and exports to rise.

Question 14

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 15

Which of the following groups would most likely benefit from unanticipated inflation?

Accepted Answer

A) borrowers 
B) lenders 
C) creditors 
D) pensioners 
A) borrowers 
B) lenders 
C) creditors 
D) pensioners

Question 16

If scientific research produces a technological breakthrough in the production of computer memory,then

Accepted Answer

A) business costs will increase,profits will fall,and production will decrease. 
B) business costs will fall,but profits will also fall,and production will decrease. 
C) business costs will fall,profits will improve,and production will increase. 
D) profits will increase because businesses will cut back production. 
A) business costs will increase,profits will fall,and production will decrease. 
B) business costs will fall,but profits will also fall,and production will decrease. 
C) business costs will fall,profits will improve,and production will increase. 
D) profits will increase because businesses will cut back production.

Question 17

Figure 9-3
  
-Suppose that U.S.tastes for British goods increase.Then,in Figure 9-3

Accepted Answer

A) the supply curve shifts from S₁ to S₂ 
B) the supply curve shifts from S₂ to S₁ 
C) the demand curve shifts from D₂ to D₁ 
D) the demand curve shifts from D₁ to D₂ 
E) both demand and supply shift to the right 
A) the supply curve shifts from S₁ to S₂ 
B) the supply curve shifts from S₂ to S₁ 
C) the demand curve shifts from D₂ to D₁ 
D) the demand curve shifts from D₁ to D₂ 
E) both demand and supply shift to the right

Question 18

How does the aggregate goods and services market differ from the regular supply and demand graph in Chapter 3? Address the measures of price,quantity,and the demand and supply curve(s).

Accepted Answer

In the aggregate goods and services mark

Question 19

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

Accepted Answer

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

Question 20

The international substitution effect exists because a

Accepted Answer

A) higher price level will reduce interest rates and stimulate foreign investment. 
B) lower price level will make domestically produced goods less expensive relative to foreign goods. 
C) higher price level will reduce the purchasing power of money. 
D) lower price level will encourage Americans to import more foreign goods. 
A) higher price level will reduce interest rates and stimulate foreign investment. 
B) lower price level will make domestically produced goods less expensive relative to foreign goods. 
C) higher price level will reduce the purchasing power of money. 
D) lower price level will encourage Americans to import more foreign goods.

Exam 9: Aan Introduction to Basic Macroeconomic Markets

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

Answer the following questions: a.What is a bond? b.If bonds make fixed payments every year,explain how a reduction in market interest rates will increase the price of the bond in the market.

Which of the following is true regarding an unanticipated increase in inflation?

The actions of borrowers and lenders are coordinated by

Which of the following will most likely result from a decline in the dollar price of a foreign currency?

The price of one country's currency in terms of another's is called

Other things constant,a decrease in resource prices will lead to

If a U.S.dollar exchanges for 10 Mexican Pesos,the dollar price of a Peso is

The circular flow of income is coordinated by the

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

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

A depreciation of a nation's currency would cause

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

Which of the following groups would most likely benefit from unanticipated inflation?

If scientific research produces a technological breakthrough in the production of computer memory,then

Figure 9-3 -Suppose that U.S.tastes for British goods increase.Then,in Figure 9-3

How does the aggregate goods and services market differ from the regular supply and demand graph in Chapter 3? Address the measures of price,quantity,and the demand and supply curve(s).

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

The international substitution effect exists because a

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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