Exam 9: A : an Introduction to Basic Macroeconomic Markets

Suppose business decision makers become more optimistic about future economic conditions and desire additional funds to expand their plant capacity. What is the likely effect on the loanable funds market?

Initially, the nominal rate of interest is 8 percent and inflation is 4 percent. The nominal interest rate then rises to 12 percent and the inflation rate to 8 percent. It follows that the real rate of interest has

A positive real interest rate indicates

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?

An unexpected sharp reduction in inflation will most likely result in

Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market?

If both borrowers and lenders anticipate the rate of inflation correctly, then

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

If expected inflation is constant, then when the nominal interest rate increases, the real interest rate

The real rate of interest equals the

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

Once decision makers fully adjust to an increase in prices,

Which of the following basic economic concepts most clearly provides the foundation for the long-run aggregate supply curve?

An appreciation in the U.S. dollar would

You just bought a $1,000 bond that is scheduled to mature in ten years. If interest rates rise during the next six months, the market value (or price) of your bond will

If the dollar price of the English pound goes from $1.50 to $2.00, the dollar has

In the short run, an unexpected increase in prices will

As the general price level in an economy rises, the aggregate quantity demanded of goods and services falls because

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