Question 1

Other things the same, a decrease 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 2

Which of the following is a correct statement?

Accepted Answer

A)  Fiscal policy is the use of tax and spending policies by Congress and the president. 
B)  Fiscal policy involves the control of the money supply by the Federal Reserve Bank. 
C)  Monetary policy involves the control of the money supply by Congress and the president. 
D)  Monetary policy is the use of tax and spending policies by the Federal Reserve Bank. 
A)  Fiscal policy is the use of tax and spending policies by Congress and the president. 
B)  Fiscal policy involves the control of the money supply by the Federal Reserve Bank. 
C)  Monetary policy involves the control of the money supply by Congress and the president. 
D)  Monetary policy is the use of tax and spending policies by the Federal Reserve Bank.

Question 3

If the value of a nation's imports exceeds exports, the nation has a

Accepted Answer

A)  government budget deficit. 
B)  trade surplus. 
C)  trade deficit. 
D)  negative net capital flow. 
A)  government budget deficit. 
B)  trade surplus. 
C)  trade deficit. 
D)  negative net capital flow.

Question 4

The change in the aggregate quantity of goods and services demanded in the U.S. is based on the logic that as the price level falls,

Accepted Answer

A)  real wealth falls, interest rates rise, and net exports fall. 
B)  real wealth falls, interest rates rise, and net exports rise. 
C)  real wealth rises, interest rates fall, and net exports fall. 
D)  real wealth rises, interest rates fall, and net exports rise. 
A)  real wealth falls, interest rates rise, and net exports fall. 
B)  real wealth falls, interest rates rise, and net exports rise. 
C)  real wealth rises, interest rates fall, and net exports fall. 
D)  real wealth rises, interest rates fall, and net exports rise.

Question 5

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)  Potential output equals Y₁. 
B)  It would be impossible for this economy to achieve an output greater than Y₁. 
C)  When output Y₁ is achieved, the actual rate of unemployment will exceed the natural rate of unemployment. 
D)  When output Y₁ is achieved, the actual rate of unemployment will be less than the natural rate of unemployment. 
A)  Potential output equals Y₁. 
B)  It would be impossible for this economy to achieve an output greater than Y₁. 
C)  When output Y₁ is achieved, the actual rate of unemployment will exceed the natural rate of unemployment. 
D)  When output Y₁ is achieved, the actual rate of unemployment will be less than the natural rate of unemployment.

Question 6

The money rate of interest will be less than the real rate of interest when decision makers anticipate

Accepted Answer

A)  stable prices in the future. 
B)  falling prices in the future. 
C)  inflation in the future. 
D)  that the money rate of interest will decline. 
A)  stable prices in the future. 
B)  falling prices in the future. 
C)  inflation in the future. 
D)  that the money rate of interest will decline.

Question 7

The aggregate demand curve indicates the relationship between

Accepted Answer

A)  the real wage rate and the quality of resources demanded by producers of goods and services. 
B)  the interest rate and the amount of loanable funds demanded by borrowers. 
C)  the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium. 
D)  the general price level and the aggregate quantity of goods and services demanded. 
A)  the real wage rate and the quality of resources demanded by producers of goods and services. 
B)  the interest rate and the amount of loanable funds demanded by borrowers. 
C)  the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium. 
D)  the general price level and the aggregate quantity of goods and services demanded.

Question 8

Suppose people expect inflation to be 3 percent during the next several years. When the real interest rate is 5 percent, the money, or nominal interest rate, will be

Accepted Answer

A)  1 percent. 
B)  4 percent. 
C)  7 percent. 
D)  8 percent. 
A)  1 percent. 
B)  4 percent. 
C)  7 percent. 
D)  8 percent.

Question 9

If equilibrium is present in the foreign exchange market and a nation is experiencing a trade deficit,

Accepted Answer

A)  the nation must be experiencing a net capital inflow. 
B)  the nation must be experiencing a net capital outflow. 
C)  the nation's inflation rate must increase. 
D)  the nation's interest rate must increase. 
A)  the nation must be experiencing a net capital inflow. 
B)  the nation must be experiencing a net capital outflow. 
C)  the nation's inflation rate must increase. 
D)  the nation's interest rate must increase.

Question 10

Gladys agrees to lend Kay $1,000 for one year at a nominal rate of interest of 5 percent. At the end of the year prices have actually risen by 7 percent. Gladys earned a real rate of return of

Accepted Answer

A)  Negative 2%. 
B)  2%. 
C)  5%. 
D)  7%. 
A)  Negative 2%. 
B)  2%. 
C)  5%. 
D)  7%.

Question 11

If net exports are positive, then

Accepted Answer

A)  net capital outflow is positive (indicating an inflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B)  net capital outflow is positive (indicating an inflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C)  net capital outflow is negative (indicating an outflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D)  net capital outflow is negative (indicating an outflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans. 
A)  net capital outflow is positive (indicating an inflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B)  net capital outflow is positive (indicating an inflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C)  net capital outflow is negative (indicating an outflow of capital), so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D)  net capital outflow is negative (indicating an outflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans.

Question 12

As the real interest rate in the domestic loanable funds market increases,

Accepted Answer

A)  the cost of purchasing goods and services during the current period will decline. 
B)  the net inflow of capital from abroad will increase. 
C)  the inflationary premium will rise, and the money rate of interest will decline. 
D)  the inflationary premium will fall, and the money rate of interest will rise. 
A)  the cost of purchasing goods and services during the current period will decline. 
B)  the net inflow of capital from abroad will increase. 
C)  the inflationary premium will rise, and the money rate of interest will decline. 
D)  the inflationary premium will fall, and the money rate of interest will rise.

Question 13

Which of the following markets coordinates transactions with foreigners that involve the exchange of currency?

Accepted Answer

A)  the resource market 
B)  the stock market 
C)  the foreign exchange market 
D)  the loanable funds market 
A)  the resource market 
B)  the stock market 
C)  the foreign exchange market 
D)  the loanable funds market

Question 14

The market for labor services is included in the

Accepted Answer

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

Question 15

If the price level in the current period is higher 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 16

Other things equal, which of the following is true?

Accepted Answer

A)  A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B)  A reduction in prices will lead to a decline in net exports. 
C)  A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D)  A reduction in prices will increase profit margins and, thereby, stimulate additional investment. 
A)  A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B)  A reduction in prices will lead to a decline in net exports. 
C)  A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D)  A reduction in prices will increase profit margins and, thereby, stimulate additional investment.

Question 17

Because many resource prices are set by long-term contracts, in the short run

Accepted Answer

A)  costs will increase by more than product prices when demand increases. 
B)  costs will decrease when the demand for products increases. 
C)  costs will increase by less than product prices when demand increases. 
D)  costs will decrease by more than product prices when demand decreases. 
A)  costs will increase by more than product prices when demand increases. 
B)  costs will decrease when the demand for products increases. 
C)  costs will increase by less than product prices when demand increases. 
D)  costs will decrease by more than product prices when demand decreases.

Question 18

Suppose, over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent.

Accepted Answer

A)  The dollar value of savings increased at 2 percent, and the value of savings measured in goods increased at 3 percent. 
B)  The dollar value of savings increased at 1 percent, and the value of savings measured in goods increased at 2 percent. 
C)  The dollar value of savings increased at 3 percent, and the value of savings measured in goods increased at 1 percent. 
D)  The dollar value of savings increased at 4 percent, and the value of savings measured in goods increased at 3 percent. 
A)  The dollar value of savings increased at 2 percent, and the value of savings measured in goods increased at 3 percent. 
B)  The dollar value of savings increased at 1 percent, and the value of savings measured in goods increased at 2 percent. 
C)  The dollar value of savings increased at 3 percent, and the value of savings measured in goods increased at 1 percent. 
D)  The dollar value of savings increased at 4 percent, and the value of savings measured in goods increased at 3 percent.

Question 19

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Accepted Answer

A)  the supply of loanable funds would shift right and investment would increase. 
B)  the supply of loanable funds would shift left and investment would decrease. 
C)  the demand for loanable funds would shift right and investment would increase. 
D)  the demand for loanable funds would shift left and investment would decrease. 
A)  the supply of loanable funds would shift right and investment would increase. 
B)  the supply of loanable funds would shift left and investment would decrease. 
C)  the demand for loanable funds would shift right and investment would increase. 
D)  the demand for loanable funds would shift left and investment would decrease.

Question 20

The aggregate demand curve slopes downward indicating that

Accepted Answer

A)  an increase in the general price level will reduce the aggregate quantity of goods and services demanded. 
B)  an increase in the general price level will increase the aggregate quantity of goods and services demanded. 
C)  a change in the interest rate will alter the aggregate quantity of goods and services demanded. 
D)  consumers substitute between domestic-made and foreign-made goods as their relative prices change. 
A)  an increase in the general price level will reduce the aggregate quantity of goods and services demanded. 
B)  an increase in the general price level will increase the aggregate quantity of goods and services demanded. 
C)  a change in the interest rate will alter the aggregate quantity of goods and services demanded. 
D)  consumers substitute between domestic-made and foreign-made goods as their relative prices change.

Exam 9: A : an Introduction to Basic Macroeconomic Markets

Other things the same, a decrease in the price level makes the dollars people hold worth

Which of the following is a correct statement?

If the value of a nation's imports exceeds exports, the nation has a

The change in the aggregate quantity of goods and services demanded in the U.S. is based on the logic that as the price level falls,

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?

The money rate of interest will be less than the real rate of interest when decision makers anticipate

The aggregate demand curve indicates the relationship between

Suppose people expect inflation to be 3 percent during the next several years. When the real interest rate is 5 percent, the money, or nominal interest rate, will be

If equilibrium is present in the foreign exchange market and a nation is experiencing a trade deficit,

Gladys agrees to lend Kay $1,000 for one year at a nominal rate of interest of 5 percent. At the end of the year prices have actually risen by 7 percent. Gladys earned a real rate of return of

If net exports are positive, then

As the real interest rate in the domestic loanable funds market increases,

Which of the following markets coordinates transactions with foreigners that involve the exchange of currency?

The market for labor services is included in the

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

Other things equal, which of the following is true?

Because many resource prices are set by long-term contracts, in the short run

Suppose, over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent.

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

The aggregate demand curve slopes downward indicating that

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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