Question 1

If the actual price level exceeds the expected price level reflected in long-term contracts,

Accepted Answer

A)  firms will find production more profitable than they had expected and will decrease the quantity of output supplied 
B)  firms will find production less profitable than they had expected and will decrease the quantity of output supplied 
C)  firms will find production less profitable than they had expected and will increase the quantity of output supplied 
D)  unemployment will decrease 
A)  firms will find production more profitable than they had expected and will decrease the quantity of output supplied 
B)  firms will find production less profitable than they had expected and will decrease the quantity of output supplied 
C)  firms will find production less profitable than they had expected and will increase the quantity of output supplied 
D)  unemployment will decrease

Question 2

Which of the following accurately indicates the relationship between the short-run and long-run aggregate supply curves?

Accepted Answer

A)  In the short run, aggregate supply is sloped upward to the right, and in the long run, it is vertical. 
B)  In the short run, aggregate supply is vertical, and in the long run, it is sloped upward to the right. 
C)  In the short run, aggregate supply is downward sloping, but in the long run, it is sloped upward to the right. 
D)  In the short run, aggregate supply is sloped upward to the right, but in the long run, it is downward sloping. 
A)  In the short run, aggregate supply is sloped upward to the right, and in the long run, it is vertical. 
B)  In the short run, aggregate supply is vertical, and in the long run, it is sloped upward to the right. 
C)  In the short run, aggregate supply is downward sloping, but in the long run, it is sloped upward to the right. 
D)  In the short run, aggregate supply is sloped upward to the right, but in the long run, it is downward sloping.

Question 3

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 4

Which of the following is the most accurate statement about real and nominal interest rates?

Accepted Answer

A)  Real interest rates can be either positive or negative, but nominal interest rates must be positive. 
B)  Real interest rates and nominal interest rates must be positive. 
C)  Real interest rates must be positive, but nominal interest rates can be either positive or negative. 
D)  Real interest rates and nominal interest rates can be either positive or negative. 
A)  Real interest rates can be either positive or negative, but nominal interest rates must be positive. 
B)  Real interest rates and nominal interest rates must be positive. 
C)  Real interest rates must be positive, but nominal interest rates can be either positive or negative. 
D)  Real interest rates and nominal interest rates can be either positive or negative.

Question 5

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 6

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 7

Figure 9-3
  
-Suppose that British incomes rise relative to incomes in the United States. Then, in Figure 9-3

Accepted Answer

A)  the demand curve will shift from D₁ to D₂ 
B)  the demand curve will shift from D₂ to D₁ 
C)  the supply curve will shift from S₁ to S₂ 
D)  the supply curve will shift from S₂ to S₁ 
E)  neither the demand for nor the supply curve will shift 
A)  the demand curve will shift from D₁ to D₂ 
B)  the demand curve will shift from D₂ to D₁ 
C)  the supply curve will shift from S₁ to S₂ 
D)  the supply curve will shift from S₂ to S₁ 
E)  neither the demand for nor the supply curve will shift

Question 8

The aggregate demand curve is downward sloping because

Accepted Answer

A)  an increase in the price level will cause an increase in spending on goods and services. 
B)  at lower price levels, real wealth decreases, causing a decrease in the quantity demanded of goods and services. 
C)  at lower price levels, interest rates increase, causing a decrease in the quantity demanded of goods and services. 
D)  at lower price levels, net exports increase, causing an increase in quantity demanded of goods and services. 
A)  an increase in the price level will cause an increase in spending on goods and services. 
B)  at lower price levels, real wealth decreases, causing a decrease in the quantity demanded of goods and services. 
C)  at lower price levels, interest rates increase, causing a decrease in the quantity demanded of goods and services. 
D)  at lower price levels, net exports increase, causing an increase in quantity demanded of goods and services.

Question 9

When persistent inflation is present, we would expect

Accepted Answer

A)  borrowers to systematically gain at the expense of lenders. 
B)  lenders to systematically gain at the expense of borrowers. 
C)  nominal interest rates to be higher than would be true if prices were stable. 
D)  nominal interest rates to be lower than real interest rates. 
A)  borrowers to systematically gain at the expense of lenders. 
B)  lenders to systematically gain at the expense of borrowers. 
C)  nominal interest rates to be higher than would be true if prices were stable. 
D)  nominal interest rates to be lower than real interest rates.

Question 10

As prices rise, a fixed money supply will be able to buy fewer goods and services. This effect is due to a(n)

Accepted Answer

A)  reduction in the interest rate. 
B)  increase in aggregate demand. 
C)  decline in the purchasing power of money. 
D)  increase in income. 
A)  reduction in the interest rate. 
B)  increase in aggregate demand. 
C)  decline in the purchasing power of money. 
D)  increase in income.

Question 11

For a major country with extensive capital flows, what is the effect of a decrease in interest rates?

Accepted Answer

A)  There will be an inflow of capital, a currency depreciation, and increased net exports. 
B)  There will be an inflow of capital, a currency depreciation, and reduced net exports. 
C)  There will be an outflow of capital, a currency depreciation, and increased net exports. 
D)  There will be an inflow of capital, a currency appreciation, and reduced net exports. 
A)  There will be an inflow of capital, a currency depreciation, and increased net exports. 
B)  There will be an inflow of capital, a currency depreciation, and reduced net exports. 
C)  There will be an outflow of capital, a currency depreciation, and increased net exports. 
D)  There will be an inflow of capital, a currency appreciation, and reduced net exports.

Question 12

Which of the following is the primary factor that coordinates the actions of borrowers and lenders in the loanable funds market?

Accepted Answer

A)  inflation rate 
B)  unemployment rate 
C)  the government 
D)  interest rate 
A)  inflation rate 
B)  unemployment rate 
C)  the government 
D)  interest rate

Question 13

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.

Question 14

Which of the following helps explain why the aggregate quantity demanded of goods and services is inversely related to prices within the framework of the AD/AS model?

Accepted Answer

A)  As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services. 
B)  As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the quantity of goods and services purchased. 
C)  As prices fall, the government will have to reduce taxes, which will lead to an increase in the quantity of goods and services purchased. 
D)  As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services. 
A)  As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services. 
B)  As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the quantity of goods and services purchased. 
C)  As prices fall, the government will have to reduce taxes, which will lead to an increase in the quantity of goods and services purchased. 
D)  As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services.

Question 15

The market that coordinates the exchange of productive inputs between the household and business sectors is the

Accepted Answer

A)  stock market. 
B)  goods and services market. 
C)  resource market. 
D)  loanable funds market. 
A)  stock market. 
B)  goods and services market. 
C)  resource market. 
D)  loanable funds market.

Question 16

If the expected rate of inflation is zero, the real interest rate must

Accepted Answer

A)  also equal zero. 
B)  be greater than the money (nominal) interest rate. 
C)  be equal to the money (nominal) interest rate. 
D)  be less than the money (nominal) interest rate. 
A)  also equal zero. 
B)  be greater than the money (nominal) interest rate. 
C)  be equal to the money (nominal) interest rate. 
D)  be less than the money (nominal) interest rate.

Question 17

Long-run equilibrium in the goods and services market requires that

Accepted Answer

A)  aggregate supply equals aggregate demand and that decision makers correctly anticipate the level of prices. 
B)  the unemployment rate is zero. 
C)  prices are neither increasing nor decreasing. 
D)  aggregate supply be larger than aggregate demand. 
A)  aggregate supply equals aggregate demand and that decision makers correctly anticipate the level of prices. 
B)  the unemployment rate is zero. 
C)  prices are neither increasing nor decreasing. 
D)  aggregate supply be larger than aggregate demand.

Question 18

Other things constant, if the cost of labor goes down, the profits of firms will

Accepted Answer

A)  increase, and short-run aggregate supply will shift to the right. 
B)  fall, and short-run aggregate supply will shift to the left. 
C)  increase, and long-run aggregate supply will shift to the right. 
D)  fall, and long-run aggregate supply will shift to the left. 
A)  increase, and short-run aggregate supply will shift to the right. 
B)  fall, and short-run aggregate supply will shift to the left. 
C)  increase, and long-run aggregate supply will shift to the right. 
D)  fall, and long-run aggregate supply will shift to the left.

Question 19

If the actual price level is lower than the expected price level reflected in long-term contracts,

Accepted Answer

A)  the actual rate of unemployment will be less than the natural rate of unemployment. 
B)  the actual rate of unemployment will exceed the natural rate of unemployment. 
C)  the natural rate of unemployment will rise. 
D)  the natural rate of unemployment will fall. 
A)  the actual rate of unemployment will be less than the natural rate of unemployment. 
B)  the actual rate of unemployment will exceed the natural rate of unemployment. 
C)  the natural rate of unemployment will rise. 
D)  the natural rate of unemployment will fall.

Question 20

The resource market is important from a macroeconomic perspective because

Accepted Answer

A)  it coordinates the allocation of productive resources and determines the costs of production. 
B)  it determines the interest rates faced by borrowers and lenders. 
C)  inflation rates are set in the resource market by the government. 
D)  resource prices determine the position of the long-run aggregate supply curve. 
A)  it coordinates the allocation of productive resources and determines the costs of production. 
B)  it determines the interest rates faced by borrowers and lenders. 
C)  inflation rates are set in the resource market by the government. 
D)  resource prices determine the position of the long-run aggregate supply curve.

Exam 9: A : an Introduction to Basic Macroeconomic Markets

If the actual price level exceeds the expected price level reflected in long-term contracts,

Which of the following accurately indicates the relationship between the short-run and long-run aggregate supply curves?

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

Which of the following is the most accurate statement about real and nominal interest rates?

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

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

Figure 9-3 -Suppose that British incomes rise relative to incomes in the United States. Then, in Figure 9-3

The aggregate demand curve is downward sloping because

When persistent inflation is present, we would expect

As prices rise, a fixed money supply will be able to buy fewer goods and services. This effect is due to a(n)

For a major country with extensive capital flows, what is the effect of a decrease in interest rates?

Which of the following is the primary factor that coordinates the actions of borrowers and lenders in the loanable funds market?

The international substitution effect exists because a

Which of the following helps explain why the aggregate quantity demanded of goods and services is inversely related to prices within the framework of the AD/AS model?

The market that coordinates the exchange of productive inputs between the household and business sectors is the

If the expected rate of inflation is zero, the real interest rate must

Long-run equilibrium in the goods and services market requires that

Other things constant, if the cost of labor goes down, the profits of firms will

If the actual price level is lower than the expected price level reflected in long-term contracts,

The resource market is important from a macroeconomic perspective because

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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