Question 1

The short-run aggregate supply curve (SRAS) slopes upward to the right because unexpected increases in prices will

Accepted Answer

A)  increase aggregate demand as consumers buy more. 
B)  decrease aggregate demand as consumers buy less. 
C)  cause firms to expand output since the higher product prices will improve profitability. 
D)  cause firms to reduce output since the higher product prices will decrease profit margins. 
A)  increase aggregate demand as consumers buy more. 
B)  decrease aggregate demand as consumers buy less. 
C)  cause firms to expand output since the higher product prices will improve profitability. 
D)  cause firms to reduce output since the higher product prices will decrease profit margins.

Question 2

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)  Output equals potential real GDP. 
B)  The actual rate of unemployment equals the natural rate of unemployment. 
C)  The output is sustainable in the long run. 
D)  All of the above statements are true. 
A)  Output equals potential real GDP. 
B)  The actual rate of unemployment equals the natural rate of unemployment. 
C)  The output is sustainable in the long run. 
D)  All of the above statements are true.

Question 3

Within the framework of the AD/AS model, if a long-run equilibrium is present in the goods and services market,

Accepted Answer

A)  decision makers will have accurately forecast the current price level when they arrived at resource price and loanable funds agreements. 
B)  the profit rates of the firms will generally exceed the competitive level. 
C)  the actual rate of unemployment will fall below the natural rate of unemployment. 
D)  the current rate of output will be sustainable in the future. 
E)  both a and d are correct. 
A)  decision makers will have accurately forecast the current price level when they arrived at resource price and loanable funds agreements. 
B)  the profit rates of the firms will generally exceed the competitive level. 
C)  the actual rate of unemployment will fall below the natural rate of unemployment. 
D)  the current rate of output will be sustainable in the future. 
E)  both a and d are correct.

Question 4

In the loanable funds market, the price that borrowers must pay for earlier availability is the

Accepted Answer

A)  inflation rate. 
B)  wage rate. 
C)  interest rate. 
D)  exchange rate. 
A)  inflation rate. 
B)  wage rate. 
C)  interest rate. 
D)  exchange rate.

Question 5

The real interest rate is

Accepted Answer

A)  the premium that borrowers must pay in order to acquire more purchasing power. 
B)  the reward lenders receive in exchange for their willingness to delay consumption into the future. 
C)  equal to the money interest rate minus the inflationary premium. 
D)  all of the above. 
A)  the premium that borrowers must pay in order to acquire more purchasing power. 
B)  the reward lenders receive in exchange for their willingness to delay consumption into the future. 
C)  equal to the money interest rate minus the inflationary premium. 
D)  all of the above.

Question 6

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 7

Which of the following events would cause the interest rate to rise?

Accepted Answer

A)  a decrease in the demand for loanable funds 
B)  an increase in the demand for loanable funds 
C)  an increase in the supply for loanable funds 
D)  a decrease in aggregate demand 
A)  a decrease in the demand for loanable funds 
B)  an increase in the demand for loanable funds 
C)  an increase in the supply for loanable funds 
D)  a decrease in aggregate demand

Question 8

When the foreign exchange market is in equilibrium, which of the following will be true?

Accepted Answer

A)  imports + exports = net capital inflow 
B)  imports - exports = net capital inflow 
C)  imports - budget deficit = net savings 
D)  imports + investment = exports + savings 
A)  imports + exports = net capital inflow 
B)  imports - exports = net capital inflow 
C)  imports - budget deficit = net savings 
D)  imports + investment = exports + savings

Question 9

Suppose that you purchase a $5,000 bond that pays 7 percent interest annually and matures in five years. If you expect that the inflation rate during the next five years will be 2 percent annually, what real rate of return do you expect to earn?

Accepted Answer

A)  2 percent 
B)  5 percent 
C)  7 percent 
D)  9 percent 
A)  2 percent 
B)  5 percent 
C)  7 percent 
D)  9 percent

Question 10

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 11

Other things the same, an increase 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 falls. 
D)  more money, so they lend less, and the interest rate rises. 
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 falls. 
D)  more money, so they lend less, and the interest rate rises.

Question 12

Other things constant, an increase in resource prices will

Accepted Answer

A)  increase the demand for goods and services. 
B)  increase the cost of producing goods and services, which will lead to a higher price level. 
C)  reduce costs and improve profit margins, which will lead to an increase in aggregate supply in the goods and services market. 
D)  cause the natural rate of unemployment to rise. 
A)  increase the demand for goods and services. 
B)  increase the cost of producing goods and services, which will lead to a higher price level. 
C)  reduce costs and improve profit margins, which will lead to an increase in aggregate supply in the goods and services market. 
D)  cause the natural rate of unemployment to rise.

Question 13

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 14

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?

Accepted Answer

A)  The demand for loanable funds will rise and the interest rate will rise. 
B)  The demand for loanable funds will fall and the interest rate will fall. 
C)  The supply for loanable funds will rise and the interest rate will fall. 
D)  The supply for loanable funds will fall and the interest rate will rise. 
A)  The demand for loanable funds will rise and the interest rate will rise. 
B)  The demand for loanable funds will fall and the interest rate will fall. 
C)  The supply for loanable funds will rise and the interest rate will fall. 
D)  The supply for loanable funds will fall and the interest rate will rise.

Question 15

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 16

If the dollar depreciates relative to the Peso, it can be said that

Accepted Answer

A)  Mexican citizens no longer respect the United States. 
B)  the dollar falls in value within the United States. 
C)  it takes fewer dollars to buy Pesos. 
D)  the Peso appreciates relative to the dollar. 
A)  Mexican citizens no longer respect the United States. 
B)  the dollar falls in value within the United States. 
C)  it takes fewer dollars to buy Pesos. 
D)  the Peso appreciates relative to the dollar.

Question 17

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 18

For most firms in the economy, the largest part of resource costs is the cost of

Accepted Answer

A)  labor. 
B)  capital. 
C)  property and machinery. 
D)  land and natural resources. 
A)  labor. 
B)  capital. 
C)  property and machinery. 
D)  land and natural resources.

Question 19

An increase in the real interest rate will

Accepted Answer

A)  increase the inflationary premium. 
B)  decrease the inflationary premium. 
C)  increase the price of current consumption relative to future consumption. 
D)  decrease the price of current consumption relative to future consumption. 
A)  increase the inflationary premium. 
B)  decrease the inflationary premium. 
C)  increase the price of current consumption relative to future consumption. 
D)  decrease the price of current consumption relative to future consumption.

Question 20

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.

Exam 9: A : an Introduction to Basic Macroeconomic Markets

The short-run aggregate supply curve (SRAS) slopes upward to the right because unexpected increases in prices will

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?

Within the framework of the AD/AS model, if a long-run equilibrium is present in the goods and services market,

In the loanable funds market, the price that borrowers must pay for earlier availability is the

The real interest rate is

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

Which of the following events would cause the interest rate to rise?

When the foreign exchange market is in equilibrium, which of the following will be true?

Suppose that you purchase a $5,000 bond that pays 7 percent interest annually and matures in five years. If you expect that the inflation rate during the next five years will be 2 percent annually, what real rate of return do you expect to earn?

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

Other things the same, an increase in the price level induces people to hold

Other things constant, an increase in resource prices will

If people suddenly anticipate that inflation will rise during the next year, which of the following is most likely?

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?

If there is surplus of loanable funds, then

If the dollar depreciates relative to the Peso, it can be said that

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

For most firms in the economy, the largest part of resource costs is the cost of

An increase in the real interest rate will

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

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

Filters