Question 1

Which of the following will most likely result from an unexpected increase in prices that decreases real wages and resource prices?

Accepted Answer

A)  a decrease in unemployment 
B)  an increase in unemployment 
C)  a decrease in the nominal interest rate 
D)  a decrease in aggregate supply and real output 
A)  a decrease in unemployment 
B)  an increase in unemployment 
C)  a decrease in the nominal interest rate 
D)  a decrease in aggregate supply and real output

Question 2

Which of the following equations is accurate?

Accepted Answer

A)  money interest rate = real interest rate - inflationary premium 
B)  real interest rate = money interest rate + inflationary premium 
C)  real interest rate = money interest rate - inflationary premium 
D)  real interest rate = money interest rate 
A)  money interest rate = real interest rate - inflationary premium 
B)  real interest rate = money interest rate + inflationary premium 
C)  real interest rate = money interest rate - inflationary premium 
D)  real interest rate = money interest rate

Question 3

If a lender expects inflation to be 5 percent, and after a loan is made, actual inflation is 10 percent, which of the following will be true?

Accepted Answer

A)  The lender will receive a lower real interest rate than he expected. 
B)  The loan will be repaid with dollars that are worth more than the lender expected. 
C)  The nominal rate of interest can be expected to fall in the future. 
D)  The lender will gain at the expense of the borrower. 
A)  The lender will receive a lower real interest rate than he expected. 
B)  The loan will be repaid with dollars that are worth more than the lender expected. 
C)  The nominal rate of interest can be expected to fall in the future. 
D)  The lender will gain at the expense of the borrower.

Question 4

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 5

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 6

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 7

Which of the following is necessarily true when an economy is in long-run equilibrium?

Accepted Answer

A)  Prices will be constant (that is, inflation will be zero). 
B)  The actual output will be less than the full-employment (or potential) output. 
C)  The actual rate of unemployment equals the natural rate of unemployment. 
D)  The output of the economy will be greater than the full-employment output. 
A)  Prices will be constant (that is, inflation will be zero). 
B)  The actual output will be less than the full-employment (or potential) output. 
C)  The actual rate of unemployment equals the natural rate of unemployment. 
D)  The output of the economy will be greater than the full-employment output.

Question 8

When equilibrium is present in the foreign exchange market, which of the following will tend to be in balance?

Accepted Answer

A)  the value of goods exported and the value of goods imported 
B)  real and nominal interest rates 
C)  imports plus capital outflow and exports plus capital inflow 
D)  tax revenues and government expenditures 
A)  the value of goods exported and the value of goods imported 
B)  real and nominal interest rates 
C)  imports plus capital outflow and exports plus capital inflow 
D)  tax revenues and government expenditures

Question 9

If expected inflation is constant and the nominal interest rate increased 3 percentage points, the real interest rate would

Accepted Answer

A)  increase 3 percentage points. 
B)  increase, but by less than 3 percentage points. 
C)  decrease, but by less than 3 percentage points. 
D)  decrease by 3 percentage points. 
A)  increase 3 percentage points. 
B)  increase, but by less than 3 percentage points. 
C)  decrease, but by less than 3 percentage points. 
D)  decrease by 3 percentage points.

Question 10

A vertical long-run aggregate supply curve indicates that

Accepted Answer

A)  an increase in the price level will not expand an economy's output capacity in the long run. 
B)  outputs greater than the long-run supply constraint cannot be achieved. 
C)  an increase in the price level will permit the economy to achieve a higher level of output. 
D)  an increase in the price level will promote technological change and more rapid economic growth. 
A)  an increase in the price level will not expand an economy's output capacity in the long run. 
B)  outputs greater than the long-run supply constraint cannot be achieved. 
C)  an increase in the price level will permit the economy to achieve a higher level of output. 
D)  an increase in the price level will promote technological change and more rapid economic growth.

Question 11

Which of the following would generally cause firms to expand output in the short run?

Accepted Answer

A)  a proportional increase in the prices of goods and services and the costs of producing them 
B)  higher profit margins as the result of an unexpected increase in the prices of goods and services 
C)  an unexpected reduction in aggregate demand 
D)  an increase in wages and the prices of other resources 
A)  a proportional increase in the prices of goods and services and the costs of producing them 
B)  higher profit margins as the result of an unexpected increase in the prices of goods and services 
C)  an unexpected reduction in aggregate demand 
D)  an increase in wages and the prices of other resources

Question 12

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 13

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 14

An increase in the real interest rate will

Accepted Answer

A)  lead to an increase in the expected inflation rate. 
B)  increase the real cost of purchasing goods and services in the current period relative to future periods. 
C)  encourage borrowers to demand a larger quantity of funds. 
D)  reduce the quantity of funds supplied to the loanable funds market. 
A)  lead to an increase in the expected inflation rate. 
B)  increase the real cost of purchasing goods and services in the current period relative to future periods. 
C)  encourage borrowers to demand a larger quantity of funds. 
D)  reduce the quantity of funds supplied to the loanable funds market.

Question 15

Other things the same, an increase in the price level makes the dollars people hold worth

Accepted Answer

A)  more, so they are willing to spend more. 
B)  more, so they are willing to spend less. 
C)  less, so they are willing to spend more. 
D)  less, so they are willing to spend less. 
A)  more, so they are willing to spend more. 
B)  more, so they are willing to spend less. 
C)  less, so they are willing to spend more. 
D)  less, so they are willing to spend less.

Question 16

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 17

Saving is

Accepted Answer

A)  the sum of the funds people hold in their checking accounts. 
B)  after-tax income that is not spent on consumption. 
C)  always equal to consumption. 
D)  equal to disposable income plus consumption. 
A)  the sum of the funds people hold in their checking accounts. 
B)  after-tax income that is not spent on consumption. 
C)  always equal to consumption. 
D)  equal to disposable income plus consumption.

Exam 9: A : an Introduction to Basic Macroeconomic Markets

Which of the following will most likely result from an unexpected increase in prices that decreases real wages and resource prices?

Which of the following equations is accurate?

If a lender expects inflation to be 5 percent, and after a loan is made, actual inflation is 10 percent, which of the following will be true?

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

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

The circular flow of income is coordinated by the

Which of the following is necessarily true when an economy is in long-run equilibrium?

When equilibrium is present in the foreign exchange market, which of the following will tend to be in balance?

If expected inflation is constant and the nominal interest rate increased 3 percentage points, the real interest rate would

A vertical long-run aggregate supply curve indicates that

Which of the following would generally cause firms to expand output in the short run?

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

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

An increase in the real interest rate will

Other things the same, an increase in the price level makes the dollars people hold worth

During a period of persistent inflation,

Saving is

The Economic Approach

A : Some Tools of the Economist

B : Some Tools of the Economist

A : Supply, Demand, and the Market Process

B : Supply, Demand, and the Market Process

A : Supply and Demand: Applications and Extensions

B : Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

A : Taking the Nations Economic Pulse

B : Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

B : an Introduction to Basic Macroeconomic Markets

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

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, Incentives, and Secondary Effects

A : Money and the Banking System

B : Money 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

A : Costs and the Supply of Goods

B : Costs and the Supply of Goods

A : Price Takers and the Competitive Process

B : Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A : Price-Searcher Markets With High Entry Barriers

B : Price-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

Special Topic 1 : Government Spending and Taxation

Special Topic 2 : The Economics of Social Security

Special Topic 3 : The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity

Special Topic 4 : Great Debates in Economics: Keynes Versus Hayek

Special Topic 5 : The Crisis of 2008: Causes and Lessons for the Future

Special Topic 6 : Lessons from the Great Depression

Special Topic 7 : Lessons from Japan and Canada

Special Topic 8 : The Federal Budget and the National Debt

Special Topic 9 : The Economics of Healthcare

Special Topic 10 : Education: Problems and Performance

Special Topic 11 : Earnings Differences Between Men and Women

Special Topic 12 : Do Labor Unions Increase the Wages of Workers?

Special Topic 13 : The Question of Resource Exhaustion

Special Topic 14 : Difficult Environmental Cases and the Role of Government

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