Question 1

Suppose the nominal interest rate was 5 percent and the inflation rate was 3.5 percent.

Accepted Answer

A)  The dollar value of savings increased at 1.5 percent, and the value of savings measured in goods increased at 3.5 percent. 
B)  The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 1.5 percent. 
C)  The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 5 percent. 
D)  The dollar value of savings increased at 5 percent, and the value of savings measured in goods increased at 1.5 percent. 
A)  The dollar value of savings increased at 1.5 percent, and the value of savings measured in goods increased at 3.5 percent. 
B)  The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 1.5 percent. 
C)  The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 5 percent. 
D)  The dollar value of savings increased at 5 percent, and the value of savings measured in goods increased at 1.5 percent.

Question 2

If the U.S. demand for British pounds increases,

Accepted Answer

A)  the dollar price of a British pound will increase 
B)  the dollar price of a British pound will decrease 
C)  the exchange rate between dollars and pounds will be out of equilibrium 
D)  the pound will fall in value against the dollar 
E)  there will be no change in either the value of the dollar or the pound 
A)  the dollar price of a British pound will increase 
B)  the dollar price of a British pound will decrease 
C)  the exchange rate between dollars and pounds will be out of equilibrium 
D)  the pound will fall in value against the dollar 
E)  there will be no change in either the value of the dollar or the pound

Question 3

When an economy operates at its long-run potential output level,

Accepted Answer

A)  aggregate demand will exceed aggregate supply in the goods and services market. 
B)  unemployment will decline to an abnormally low rate that cannot be sustained in the long run. 
C)  the actual rate of unemployment will exceed the natural rate of unemployment. 
D)  the natural and actual rates of unemployment will be equal. 
A)  aggregate demand will exceed aggregate supply in the goods and services market. 
B)  unemployment will decline to an abnormally low rate that cannot be sustained in the long run. 
C)  the actual rate of unemployment will exceed the natural rate of unemployment. 
D)  the natural and actual rates of unemployment will be equal.

Question 4

Which of the following best characterizes the circular flow of income?

Accepted Answer

A)  Households buy goods and services from businesses, and businesses sell goods and services to households. 
B)  The government purchases resources from businesses and households and then sells goods and services to businesses and households. 
C)  Businesses buy resources from the government, and households buy goods and services from businesses. 
D)  Businesses buy resources from households, and households use their income to buy goods and services from businesses. 
A)  Households buy goods and services from businesses, and businesses sell goods and services to households. 
B)  The government purchases resources from businesses and households and then sells goods and services to businesses and households. 
C)  Businesses buy resources from the government, and households buy goods and services from businesses. 
D)  Businesses buy resources from households, and households use their income to buy goods and services from businesses.

Question 5

In the foreign exchange market, the price of one nation's currency in terms of the currency of another nation is known as 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 6

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

Accepted Answer

A)  Nominal and real interest rates always move together. 
B)  Nominal and real interest rates never move together. 
C)  Nominal and real interest rates often do not move together. 
D)  Nominal and real interest rates always move in opposite directions. 
A)  Nominal and real interest rates always move together. 
B)  Nominal and real interest rates never move together. 
C)  Nominal and real interest rates often do not move together. 
D)  Nominal and real interest rates always move in opposite directions.

Question 7

If the money interest rate is 7 percent and the inflationary premium 4 percent, the real interest rate is

Accepted Answer

A)  -3 percent. 
B)  3 percent. 
C)  4 percent. 
D)  7 percent. 
A)  -3 percent. 
B)  3 percent. 
C)  4 percent. 
D)  7 percent.

Question 8

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

Accepted Answer

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

Question 9

When AD is equal to SRAS at an output level equal to the LRAS curve,

Accepted Answer

A)  we are at long-run macroeconomic equilibrium. 
B)  we are at the natural rate of unemployment. 
C)  both a and b are true. 
D)  neither a nor b is true. 
A)  we are at long-run macroeconomic equilibrium. 
B)  we are at the natural rate of unemployment. 
C)  both a and b are true. 
D)  neither a nor b is true.

Question 10

If the price level in the current period is lower than what buyers and sellers anticipated,

Accepted Answer

A)  profit margins will be unattractive, and firms will expand output. 
B)  profit margins will be unattractive, and firms will reduce output. 
C)  profit margins will be attractive, and firms will expand output. 
D)  profit margins will be attractive, and firms will reduce output. 
A)  profit margins will be unattractive, and firms will expand output. 
B)  profit margins will be unattractive, and firms will reduce output. 
C)  profit margins will be attractive, and firms will expand output. 
D)  profit margins will be attractive, and firms will reduce output.

Question 11

Which of the following properly describes the interest-rate effect of aggregate demand?

Accepted Answer

A)  A higher price level leads to higher money demand, higher money demand leads to higher interest rates, a higher interest rate increases the quantity of goods and services demanded. 
B)  A higher price level leads to higher money demand, higher money demand leads to lower interest rates, a higher interest rate reduces the quantity of goods and services demanded. 
C)  A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate reduces the quantity of goods and services demanded. 
D)  A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate increases the quantity of goods and services demanded. 
A)  A higher price level leads to higher money demand, higher money demand leads to higher interest rates, a higher interest rate increases the quantity of goods and services demanded. 
B)  A higher price level leads to higher money demand, higher money demand leads to lower interest rates, a higher interest rate reduces the quantity of goods and services demanded. 
C)  A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate reduces the quantity of goods and services demanded. 
D)  A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate increases the quantity of goods and services demanded.

Question 12

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)  not consistent will full employment of the economy's resources. 
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)  not consistent will full employment of the economy's resources.

Question 13

Which of the following provides the most accurate description of monetary policy?

Accepted Answer

A)  the deliberate control of the money supply to achieve macroeconomic goals 
B)  the use of the government's regulatory powers to improve economic efficiency 
C)  the government provision of goods to improve economic efficiency 
D)  the use of government taxation and expenditures to achieve macroeconomic goals 
A)  the deliberate control of the money supply to achieve macroeconomic goals 
B)  the use of the government's regulatory powers to improve economic efficiency 
C)  the government provision of goods to improve economic efficiency 
D)  the use of government taxation and expenditures to achieve macroeconomic goals

Question 14

Suppose you are earning 5 percent nominal interest on your savings account. If the rate of inflation is 3 percent, the real rate of interest you are earning is

Accepted Answer

A)  2 percent. 
B)  3 percent. 
C)  5 percent. 
D)  8 percent. 
A)  2 percent. 
B)  3 percent. 
C)  5 percent. 
D)  8 percent.

Question 15

If scientific research produces a technological breakthrough in the production of computer memory, then

Accepted Answer

A)  business costs will increase, profits will fall, and production will decrease. 
B)  business costs will fall, but profits will also fall, and production will decrease. 
C)  business costs will fall, profits will improve, and production will increase. 
D)  profits will increase because businesses will cut back production. 
A)  business costs will increase, profits will fall, and production will decrease. 
B)  business costs will fall, but profits will also fall, and production will decrease. 
C)  business costs will fall, profits will improve, and production will increase. 
D)  profits will increase because businesses will cut back production.

Question 16

Long-run equilibrium in the goods and services market requires that decision makers who agreed to long-term contracts must have

Accepted Answer

A)  incorrectly anticipated the level of prices when they made the agreements. 
B)  correctly anticipated the level of prices when they made the agreements. 
C)  correctly anticipated the natural rate of unemployment when they made the agreements. 
D)  correctly anticipated actual GDP when they made the agreements. 
A)  incorrectly anticipated the level of prices when they made the agreements. 
B)  correctly anticipated the level of prices when they made the agreements. 
C)  correctly anticipated the natural rate of unemployment when they made the agreements. 
D)  correctly anticipated actual GDP when they made the agreements.

Question 17

Which of the following statements about the circular flow diagram is not correct?

Accepted Answer

A)  Households receive income from the resource market; they save some of it and spend the rest of it on domestic or foreign goods and services. 
B)  The loanable funds market takes net household savings and channels it in part to the government and in part to businesses for investment. 
C)  Expenditures on GDP are equal to consumption plus government purchases plus investment plus net exports (exports minus imports). 
D)  The net inflow of capital from foreign economies must always be positive and equal to the amount of business investment. 
A)  Households receive income from the resource market; they save some of it and spend the rest of it on domestic or foreign goods and services. 
B)  The loanable funds market takes net household savings and channels it in part to the government and in part to businesses for investment. 
C)  Expenditures on GDP are equal to consumption plus government purchases plus investment plus net exports (exports minus imports). 
D)  The net inflow of capital from foreign economies must always be positive and equal to the amount of business investment.

Question 18

For an economy, aggregate demand equals

Accepted Answer

A)  consumption plus investment plus government purchases plus exports. 
B)  consumption plus investment plus government purchases plus (exports minus imports). 
C)  consumption plus investment plus (taxes minus transfers) plus (exports minus imports). 
D)  consumption plus investment plus government purchases plus (imports minus exports). 
A)  consumption plus investment plus government purchases plus exports. 
B)  consumption plus investment plus government purchases plus (exports minus imports). 
C)  consumption plus investment plus (taxes minus transfers) plus (exports minus imports). 
D)  consumption plus investment plus government purchases plus (imports minus exports).

Question 19

Who among the following is most likely to favor an appreciation of the U.S. dollar?

Accepted Answer

A)  a German professor visiting Chicago 
B)  an American farmer who depends on exports 
C)  an American professor on a tour of Austrian universities 
D)  Disney World in Orlando, Florida, a popular destination for foreign tourists 
A)  a German professor visiting Chicago 
B)  an American farmer who depends on exports 
C)  an American professor on a tour of Austrian universities 
D)  Disney World in Orlando, Florida, a popular destination for foreign tourists

Question 20

If there is shortage 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.

Exam 9: A : an Introduction to Basic Macroeconomic Markets

Suppose the nominal interest rate was 5 percent and the inflation rate was 3.5 percent.

If the U.S. demand for British pounds increases,

When an economy operates at its long-run potential output level,

Which of the following best characterizes the circular flow of income?

In the foreign exchange market, the price of one nation's currency in terms of the currency of another nation is known as the

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

If the money interest rate is 7 percent and the inflationary premium 4 percent, the real interest rate is

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

When AD is equal to SRAS at an output level equal to the LRAS curve,

If the price level in the current period is lower than what buyers and sellers anticipated,

Which of the following properly describes the interest-rate effect of aggregate demand?

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

Which of the following provides the most accurate description of monetary policy?

Suppose you are earning 5 percent nominal interest on your savings account. If the rate of inflation is 3 percent, the real rate of interest you are earning is

If scientific research produces a technological breakthrough in the production of computer memory, then

Long-run equilibrium in the goods and services market requires that decision makers who agreed to long-term contracts must have

Which of the following statements about the circular flow diagram is not correct?

For an economy, aggregate demand equals

Who among the following is most likely to favor an appreciation of the U.S. dollar?

If there is shortage of loanable funds, then

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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