Question 1

When the actual GDP equals the full-employment level of GDP, the

Accepted Answer

A)  economy is in long-run equilibrium. 
B)  price level must be rising. 
C)  expected inflation must be zero. 
D)  aggregate supply curve is not constrained by the scarcity of resources. 
A)  economy is in long-run equilibrium. 
B)  price level must be rising. 
C)  expected inflation must be zero. 
D)  aggregate supply curve is not constrained by the scarcity of resources.

Question 2

As the U.S. price level rises relative to price levels in other countries, what would happen in the U.S.?

Accepted Answer

A)  consumption and net exports would decline 
B)  consumption and net exports would increase 
C)  consumption would increase and net exports would decrease 
D)  consumption would decrease and net exports would increase 
E)  consumption and net exports would remain constant 
A)  consumption and net exports would decline 
B)  consumption and net exports would increase 
C)  consumption would increase and net exports would decrease 
D)  consumption would decrease and net exports would increase 
E)  consumption and net exports would remain constant

Question 3

When an economy is in long run equilibrium,

Accepted Answer

A)  it will be impossible to sustain the current rate of output in the future. 
B)  the interest rate will decline. 
C)  the foreign exchange value of the dollar will tend to appreciate. 
D)  the actual and natural rates of unemployment will be equal. 
A)  it will be impossible to sustain the current rate of output in the future. 
B)  the interest rate will decline. 
C)  the foreign exchange value of the dollar will tend to appreciate. 
D)  the actual and natural rates of unemployment will be equal.

Question 4

Which of the following is true?

Accepted Answer

A)  The long-run aggregate supply curve slopes upward to the right. 
B)  The aggregate quantity demanded of goods and services slopes downward to the right because it is simply the sum of the demand curves for each individual product. 
C)  An unanticipated increase in demand will increase prices and improve profit margins in the goods and services market, leading firms to expand output. 
D)  An anticipated increase in demand will lead to higher resource prices, which will cause firms to expand their output. 
A)  The long-run aggregate supply curve slopes upward to the right. 
B)  The aggregate quantity demanded of goods and services slopes downward to the right because it is simply the sum of the demand curves for each individual product. 
C)  An unanticipated increase in demand will increase prices and improve profit margins in the goods and services market, leading firms to expand output. 
D)  An anticipated increase in demand will lead to higher resource prices, which will cause firms to expand their output.

Question 5

Use the figure below to answer the following question(s).
Figure 9-2
  
-Figure 9-2 indicates that the output of the economy, y₁, is

Accepted Answer

A)  greater than the economy's long-run capacity. 
B)  equal to the economy's long-run capacity. 
C)  less than the economy's long-run capacity. 
D)  in short-run equilibrium but not long-run equilibrium. 
A)  greater than the economy's long-run capacity. 
B)  equal to the economy's long-run capacity. 
C)  less than the economy's long-run capacity. 
D)  in short-run equilibrium but not long-run equilibrium.

Question 6

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

Accepted Answer

A)  1 percent. 
B)  4 percent. 
C)  5 percent. 
D)  9 percent. 
A)  1 percent. 
B)  4 percent. 
C)  5 percent. 
D)  9 percent.

Question 7

People will spend more if the price level

Accepted Answer

A)  rises because rising prices increase the real value of the fixed quantity of money. 
B)  rises because rising prices decrease the real value of a dollar. 
C)  falls because falling prices increase the real value of a dollar. 
D)  falls because falling prices decrease the real value of a dollar. 
A)  rises because rising prices increase the real value of the fixed quantity of money. 
B)  rises because rising prices decrease the real value of a dollar. 
C)  falls because falling prices increase the real value of a dollar. 
D)  falls because falling prices decrease the real value of a dollar.

Question 8

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 9

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 be less than the natural rate of unemployment. 
D)  output will exceed the economy's long-run sustainable output. 
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 be less than the natural rate of unemployment. 
D)  output will exceed the economy's long-run sustainable output.

Question 10

Mary Green takes a summer course in London, England. She doesn't buy British pounds at the U.S. airport, where the rate is 1 pound = $1.60. Upon arrival in London, she finds that she can buy pounds for $1.65 each. Which of the following is true?

Accepted Answer

A)  Green would have been better off if she had bought pounds in the United States where U.S. dollars were cheaper. 
B)  Green would have been better off if she had bought pounds in the United States where pounds were less expensive. 
C)  The pounds were more expensive in London because a currency is always most valued in its home country. 
D)  The pounds were more expensive in the United States because they are less available there. 
E)  It doesn't matter where she buys the pounds, since she can't use U.S. money anyway once she's in England. 
A)  Green would have been better off if she had bought pounds in the United States where U.S. dollars were cheaper. 
B)  Green would have been better off if she had bought pounds in the United States where pounds were less expensive. 
C)  The pounds were more expensive in London because a currency is always most valued in its home country. 
D)  The pounds were more expensive in the United States because they are less available there. 
E)  It doesn't matter where she buys the pounds, since she can't use U.S. money anyway once she's in England.

Question 11

The money interest rate may be a misleading indicator of real borrowing costs when

Accepted Answer

A)  the unemployment rate is high. 
B)  the actual rate of unemployment exceeds the natural rate of unemployment. 
C)  the inflation rate is high. 
D)  real output is declining. 
A)  the unemployment rate is high. 
B)  the actual rate of unemployment exceeds the natural rate of unemployment. 
C)  the inflation rate is high. 
D)  real output is declining.

Question 12

Output in the goods and services market will be sustained into the future

Accepted Answer

A)  if aggregate demand and short-run aggregate supply are in balance. 
B)  only when the prior choices of decision makers were based on a correct anticipation of prices. 
C)  only when prices are rising. 
D)  only when wage rates are declining. 
A)  if aggregate demand and short-run aggregate supply are in balance. 
B)  only when the prior choices of decision makers were based on a correct anticipation of prices. 
C)  only when prices are rising. 
D)  only when wage rates are declining.

Question 13

The use of government taxation and expenditures to achieve macroeconomic goals is called

Accepted Answer

A)  cyclical policy. 
B)  monetary policy. 
C)  fiscal policy. 
D)  industrial policy. 
A)  cyclical policy. 
B)  monetary policy. 
C)  fiscal policy. 
D)  industrial policy.

Question 14

The three reasons why the aggregate demand curve slopes downward are

Accepted Answer

A)  the international substitution effect, the net exports effect and the interest rate effect. 
B)  the interest rate effect, the short run effect and the free rider effect 
C)  the net exports effect, the real balance effect and the short run effect 
D)  the real balance effect, the international substitution effect and the interest rate effect. 
A)  the international substitution effect, the net exports effect and the interest rate effect. 
B)  the interest rate effect, the short run effect and the free rider effect 
C)  the net exports effect, the real balance effect and the short run effect 
D)  the real balance effect, the international substitution effect and the interest rate effect.

Question 15

For a major country with extensive capital flows, what is the effect of an increase 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 16

Which of the following will most likely result from a decline in the dollar price of a foreign currency?

Accepted Answer

A)  an increase in the inflation rate 
B)  Foreign goods will become more expensive, and therefore, U.S. imports will decline. 
C)  U.S. exports will be cheaper for foreigners, and therefore, they will increase. 
D)  U.S. exports will become more expensive for foreigners, and therefore, they will decrease. 
A)  an increase in the inflation rate 
B)  Foreign goods will become more expensive, and therefore, U.S. imports will decline. 
C)  U.S. exports will be cheaper for foreigners, and therefore, they will increase. 
D)  U.S. exports will become more expensive for foreigners, and therefore, they will decrease.

Question 17

A decrease in the dollar price of the English pound will make

Accepted Answer

A)  U.S. exports to England increase. 
B)  U.S. exports less expensive for the English. 
C)  imports from England more expensive for Americans. 
D)  U.S. exports to England decrease. 
A)  U.S. exports to England increase. 
B)  U.S. exports less expensive for the English. 
C)  imports from England more expensive for Americans. 
D)  U.S. exports to England decrease.

Question 18

Within the aggregate demand/aggregate supply framework, the quantity on the horizontal axis in the aggregate goods and services market represents the

Accepted Answer

A)  total amount of government spending. 
B)  total real output (real GDP) of the economy. 
C)  total unemployment of the economy. 
D)  price level of the economy. 
A)  total amount of government spending. 
B)  total real output (real GDP) of the economy. 
C)  total unemployment of the economy. 
D)  price level of the economy.

Question 19

Americans needing foreign currencies get those currencies from a bank. The ultimate source of these currencies is

Accepted Answer

A)  U.S. investments abroad. 
B)  U.S. sales to foreign countries. 
C)  U.S. purchases of foreign goods, services, and assets. 
D)  the International Monetary Fund. 
A)  U.S. investments abroad. 
B)  U.S. sales to foreign countries. 
C)  U.S. purchases of foreign goods, services, and assets. 
D)  the International Monetary Fund.

Question 20

From 1994 to 1999, inflation in the United States was relatively constant at approximately 2.5 percent. When inflation is constant for an extended period, which of the following is most likely?

Accepted Answer

A)  People will correctly anticipate the actual inflation rate, and the actual rate of unemployment will approach the natural rate of unemployment. 
B)  People will correctly anticipate the actual inflation rate, and the actual rate of unemployment will exceed the natural rate of unemployment. 
C)  The actual inflation rate will be greater than the anticipated rate, leading to an actual rate of unemployment that exceeds the natural rate of unemployment. 
D)  Actual inflation will be less than the anticipated rate, leading to an actual rate of unemployment that exceeds the natural rate of unemployment. 
A)  People will correctly anticipate the actual inflation rate, and the actual rate of unemployment will approach the natural rate of unemployment. 
B)  People will correctly anticipate the actual inflation rate, and the actual rate of unemployment will exceed the natural rate of unemployment. 
C)  The actual inflation rate will be greater than the anticipated rate, leading to an actual rate of unemployment that exceeds the natural rate of unemployment. 
D)  Actual inflation will be less than the anticipated rate, leading to an actual rate of unemployment that exceeds the natural rate of unemployment.

Exam 9: A : an Introduction to Basic Macroeconomic Markets

When the actual GDP equals the full-employment level of GDP, the

As the U.S. price level rises relative to price levels in other countries, what would happen in the U.S.?

When an economy is in long run equilibrium,

Which of the following is true?

Use the figure below to answer the following question(s). Figure 9-2 -Figure 9-2 indicates that the output of the economy, y₁, is

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

People will spend more if the price level

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

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

Mary Green takes a summer course in London, England. She doesn't buy British pounds at the U.S. airport, where the rate is 1 pound = $1.60. Upon arrival in London, she finds that she can buy pounds for $1.65 each. Which of the following is true?

The money interest rate may be a misleading indicator of real borrowing costs when

Output in the goods and services market will be sustained into the future

The use of government taxation and expenditures to achieve macroeconomic goals is called

The three reasons why the aggregate demand curve slopes downward are

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

Which of the following will most likely result from a decline in the dollar price of a foreign currency?

A decrease in the dollar price of the English pound will make

Within the aggregate demand/aggregate supply framework, the quantity on the horizontal axis in the aggregate goods and services market represents the

Americans needing foreign currencies get those currencies from a bank. The ultimate source of these currencies is

From 1994 to 1999, inflation in the United States was relatively constant at approximately 2.5 percent. When inflation is constant for an extended period, which of the following is most likely?

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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