Question 1

In the loanable funds market,the true burden of borrowers and the true yield to lenders is the

Accepted Answer

A) real (inflation adjusted)interest rate. 
B) nominal (money)interest rate. 
C) inflation rate. 
D) inflation premium rate (in money terms). 
A) real (inflation adjusted)interest rate. 
B) nominal (money)interest rate. 
C) inflation rate. 
D) inflation premium rate (in money terms).

Question 2

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

Accepted Answer

A) an abnormally high rate of unemployment. 
B) an abnormally low rate of unemployment. 
C) its natural rate of unemployment. 
D) an output that cannot be sustained. 
A) an abnormally high rate of unemployment. 
B) an abnormally low rate of unemployment. 
C) its natural rate of unemployment. 
D) an output that cannot be sustained.

Question 3

As prices rise,consumers and businesses will want to hold larger money balances.This will lead to

Accepted Answer

A) a reduction in the demand for resources and reduced resource prices. 
B) an increase in the amount of goods and services demanded due to the real balance effect. 
C) an increase in exports due to the international substitution effect. 
D) a reduction in the supply of loanable funds and an increase in the interest rate. 
A) a reduction in the demand for resources and reduced resource prices. 
B) an increase in the amount of goods and services demanded due to the real balance effect. 
C) an increase in exports due to the international substitution effect. 
D) a reduction in the supply of loanable funds and an increase in the interest rate.

Question 4

Other things the same,a decrease in the price level induces people to hold

Accepted Answer

A) less money,so they lend less,and the interest rate rises. 
B) less money,so they lend more,and the interest rate falls. 
C) more money,so they lend more,and the interest rate rises. 
D) more money,so they lend less,and the interest rate falls. 
A) less money,so they lend less,and the interest rate rises. 
B) less money,so they lend more,and the interest rate falls. 
C) more money,so they lend more,and the interest rate rises. 
D) more money,so they lend less,and the interest rate falls.

Question 5

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 6

Suppose people anticipate inflation will be 5 percent during the next several years.If the real rate of interest is 4 percent,the money rate of interest must be

Accepted Answer

A) 1 percent. 
B) 4 percent. 
C) 9 percent. 
D) 12 percent. 
A) 1 percent. 
B) 4 percent. 
C) 9 percent. 
D) 12 percent.

Question 7

Steven puts money into an account.One year later he sees that he has 6 percent more dollars and that his money will buy 2 percent more goods.

Accepted Answer

A) The nominal interest rate was 8 percent and the inflation rate was 6 percent. 
B) The nominal interest rate was 6 percent and the inflation rate was 4 percent. 
C) The nominal interest rate was 4 percent and the inflation rate was 2 percent. 
D) None of the above is correct. 
A) The nominal interest rate was 8 percent and the inflation rate was 6 percent. 
B) The nominal interest rate was 6 percent and the inflation rate was 4 percent. 
C) The nominal interest rate was 4 percent and the inflation rate was 2 percent. 
D) None of the above is correct.

Question 8

If there is surplus 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 9

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

Question 10

As the dollar depreciates,which of the following is most likely to occur?

Accepted Answer

A) More Americans will travel abroad. 
B) American imports will rise. 
C) More foreigners will visit the United States. 
D) American firms will increase their investments abroad. 
A) More Americans will travel abroad. 
B) American imports will rise. 
C) More foreigners will visit the United States. 
D) American firms will increase their investments abroad.

Question 11

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 12

When equilibrium is present,if market conditions do not change,

Accepted Answer

A) the current price will tend to rise in the future,and the current quantity will tend to fall. 
B) the current price will tend to fall in the future,and the current quantity will tend to rise. 
C) the current price and quantity will tend to persist in the future. 
D) the current price will tend to persist in the future,but the current quantity will tend to rise. 
A) the current price will tend to rise in the future,and the current quantity will tend to fall. 
B) the current price will tend to fall in the future,and the current quantity will tend to rise. 
C) the current price and quantity will tend to persist in the future. 
D) the current price will tend to persist in the future,but the current quantity will tend to rise.

Question 13

Suppose,over the past year,the real interest rate was 3 percent and the inflation rate was 1 percent.

Accepted Answer

A) The dollar value of savings increased at 2 percent,and the value of savings measured in goods increased at 3 percent. 
B) The dollar value of savings increased at 1 percent,and the value of savings measured in goods increased at 2 percent. 
C) The dollar value of savings increased at 3 percent,and the value of savings measured in goods increased at 1 percent. 
D) The dollar value of savings increased at 4 percent,and the value of savings measured in goods increased at 3 percent. 
A) The dollar value of savings increased at 2 percent,and the value of savings measured in goods increased at 3 percent. 
B) The dollar value of savings increased at 1 percent,and the value of savings measured in goods increased at 2 percent. 
C) The dollar value of savings increased at 3 percent,and the value of savings measured in goods increased at 1 percent. 
D) The dollar value of savings increased at 4 percent,and the value of savings measured in goods increased at 3 percent.

Question 14

Other things constant,a decrease in aggregate demand will lead to

Accepted Answer

A) a decrease in the demand for resources. 
B) an increase in the demand for resources. 
C) an increase in the general level of prices. 
D) a reduction in the natural rate of unemployment. 
A) a decrease in the demand for resources. 
B) an increase in the demand for resources. 
C) an increase in the general level of prices. 
D) a reduction in the natural rate of unemployment.

Question 15

Suppose you are earning 5 percent nominal interest on your savings account.If the rate of inflation is 3 percent,the real rate of interest you are earning is

Accepted Answer

A) 2 percent. 
B) 3 percent. 
C) 5 percent. 
D) 8 percent. 
A) 2 percent. 
B) 3 percent. 
C) 5 percent. 
D) 8 percent.

Question 16

In 1999,the nominal interest rate on a 30-year bond was around 5.85 percent.Assuming that investors have set these contracts expecting a real interest rate of 3 percent,what is the average rate of inflation that investors in the market are expecting over the next thirty years?

Accepted Answer

A) 2.85 percent 
B) 3 percent 
C) 5.85 percent 
D) 8.85 percent 
A) 2.85 percent 
B) 3 percent 
C) 5.85 percent 
D) 8.85 percent

Question 17

Who among the following is most likely to favor an appreciation of the U.S.dollar?

Accepted Answer

A) a German professor visiting Chicago 
B) an American farmer who depends on exports 
C) an American professor on a tour of Austrian universities 
D) Disney World in Orlando,Florida,a popular destination for foreign tourists 
A) a German professor visiting Chicago 
B) an American farmer who depends on exports 
C) an American professor on a tour of Austrian universities 
D) Disney World in Orlando,Florida,a popular destination for foreign tourists

Question 18

If for some reason Americans wished to purchase more foreign assets,then other things the same

Accepted Answer

A) both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall. 
B) both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise. 
C) the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall. 
D) the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise. 
A) both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall. 
B) both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise. 
C) the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall. 
D) the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.

Question 19

If prices in the United States rose,which of the following could be directly attributed to the international substitution effect?

Accepted Answer

A) Americans reduce their purchases of Japanese cars. 
B) Australians buy more American surfboards. 
C) Europeans purchase fewer American-made personal computers. 
D) Americans sell more wheat to India. 
A) Americans reduce their purchases of Japanese cars. 
B) Australians buy more American surfboards. 
C) Europeans purchase fewer American-made personal computers. 
D) Americans sell more wheat to India.

Question 20

Which of the following best characterizes the circular flow of income?

Accepted Answer

A) Households buy goods and services from businesses,and businesses sell goods and services to households. 
B) The government purchases resources from businesses and households and then sells goods and services to businesses and households. 
C) Businesses buy resources from the government,and households buy goods and services from businesses. 
D) Businesses buy resources from households,and households use their income to buy goods and services from businesses. 
A) Households buy goods and services from businesses,and businesses sell goods and services to households. 
B) The government purchases resources from businesses and households and then sells goods and services to businesses and households. 
C) Businesses buy resources from the government,and households buy goods and services from businesses. 
D) Businesses buy resources from households,and households use their income to buy goods and services from businesses.

Exam 9: Aan Introduction to Basic Macroeconomic Markets

In the loanable funds market,the true burden of borrowers and the true yield to lenders is the

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

As prices rise,consumers and businesses will want to hold larger money balances.This will lead to

Other things the same,a decrease in the price level induces people to hold

The real rate of interest equals the

Suppose people anticipate inflation will be 5 percent during the next several years.If the real rate of interest is 4 percent,the money rate of interest must be

Steven puts money into an account.One year later he sees that he has 6 percent more dollars and that his money will buy 2 percent more goods.

If there is surplus of loanable funds,then

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

As the dollar depreciates,which of the following is most likely to occur?

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

When equilibrium is present,if market conditions do not change,

Suppose,over the past year,the real interest rate was 3 percent and the inflation rate was 1 percent.

Other things constant,a decrease in aggregate demand will lead to

Suppose you are earning 5 percent nominal interest on your savings account.If the rate of inflation is 3 percent,the real rate of interest you are earning is

In 1999,the nominal interest rate on a 30-year bond was around 5.85 percent.Assuming that investors have set these contracts expecting a real interest rate of 3 percent,what is the average rate of inflation that investors in the market are expecting over the next thirty years?

Who among the following is most likely to favor an appreciation of the U.S.dollar?

If for some reason Americans wished to purchase more foreign assets,then other things the same

If prices in the United States rose,which of the following could be directly attributed to the international substitution effect?

Which of the following best characterizes the circular flow of income?

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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