Question 1

If the nation's investment opportunities are highly attractive relative to those available abroad, the nation will tend to

Accepted Answer

A)  experience an outflow of capital and a trade deficit. 
B)  experience an outflow of capital and a trade surplus. 
C)  experience an inflow of capital and a trade deficit. 
D)  experience an inflow of capital and a trade surplus. 
A)  experience an outflow of capital and a trade deficit. 
B)  experience an outflow of capital and a trade surplus. 
C)  experience an inflow of capital and a trade deficit. 
D)  experience an inflow of capital and a trade surplus.

Question 2

In the context of aggregate supply, the short run is defined as the period during which

Accepted Answer

A)  some prices are set by contracts and cannot be adjusted. 
B)  prices can change, but neither aggregate supply nor aggregate demand can shift. 
C)  individuals have sufficient time to modify their behavior in response to price changes. 
D)  quantity changes cannot occur in response to changes in relative prices. 
A)  some prices are set by contracts and cannot be adjusted. 
B)  prices can change, but neither aggregate supply nor aggregate demand can shift. 
C)  individuals have sufficient time to modify their behavior in response to price changes. 
D)  quantity changes cannot occur in response to changes in relative prices.

Question 3

The four key markets in the simple AD/AS model are

Accepted Answer

A)  food, housing, clothing, and automobiles. 
B)  consumption, investment, bond, and foreign trade. 
C)  goods and services, resources, foreign exchange, and loanable funds. 
D)  labor, public goods, bond, and the stock market. 
A)  food, housing, clothing, and automobiles. 
B)  consumption, investment, bond, and foreign trade. 
C)  goods and services, resources, foreign exchange, and loanable funds. 
D)  labor, public goods, bond, and the stock market.

Question 4

A decrease in the dollar price of foreign currency would cause

Accepted Answer

A)  the nation's imports to increase and exports to decline. 
B)  the nation's exports to increase and imports to decline. 
C)  both imports and exports to decline. 
D)  both imports and exports to rise. 
A)  the nation's imports to increase and exports to decline. 
B)  the nation's exports to increase and imports to decline. 
C)  both imports and exports to decline. 
D)  both imports and exports to rise.

Question 5

In the aggregate demand and aggregate supply model,

Accepted Answer

A)  the factors that cause the individual demand curve to slope downward are the same as the factors that cause the aggregate demand curve to slope downward. 
B)  the factors that cause the individual supply curve to slope upward are the same as the factors that cause the short-run aggregate supply curve to slope upward. 
C)  the upward-sloping aggregate demand curve intersects the downward-sloping short-run aggregate supply curve to determine the economy's price level and GDP. 
D)  the upward-sloping short-run aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP. 
A)  the factors that cause the individual demand curve to slope downward are the same as the factors that cause the aggregate demand curve to slope downward. 
B)  the factors that cause the individual supply curve to slope upward are the same as the factors that cause the short-run aggregate supply curve to slope upward. 
C)  the upward-sloping aggregate demand curve intersects the downward-sloping short-run aggregate supply curve to determine the economy's price level and GDP. 
D)  the upward-sloping short-run aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP.

Question 6

The supply of resources, level of technology, and the quality of an economy's institutional arrangements provide the constraint that determines the shape of the

Accepted Answer

A)  short-run aggregate supply curve. 
B)  long-run aggregate supply curve. 
C)  supply of loanable funds. 
D)  aggregate demand curve. 
A)  short-run aggregate supply curve. 
B)  long-run aggregate supply curve. 
C)  supply of loanable funds. 
D)  aggregate demand curve.

Question 7

(I) If long-run equilibrium is present in the goods and services market, the current price level will equal the price level buyers and sellers anticipated. (II) When an economy is in long-run equilibrium, the actual rate of unemployment will equal the natural rate of unemployment.

Accepted Answer

A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true. 
A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true.

Question 8

Which of the following will most likely cause a decrease in short-run aggregate supply in the goods and services market?

Accepted Answer

A)  an increase in the productivity of labor 
B)  a reduction in the price of crude oil, a major imported commodity 
C)  an increase in resource prices 
D)  favorable weather conditions in agricultural areas 
A)  an increase in the productivity of labor 
B)  a reduction in the price of crude oil, a major imported commodity 
C)  an increase in resource prices 
D)  favorable weather conditions in agricultural areas

Question 9

Use the figure below to answer the following question(s).
Figure 9-2
  
-When an economy is experiencing the aggregate demand and supply conditions depicted in Figure 9-2,

Accepted Answer

A)  the actual rate of unemployment will equal the natural rate of unemployment. 
B)  buyers and sellers will have correctly anticipated the level of prices P₁. 
C)  the output Y₁ will tend to persist into the future unless market conditions change. 
D)  all of the above are correct. 
A)  the actual rate of unemployment will equal the natural rate of unemployment. 
B)  buyers and sellers will have correctly anticipated the level of prices P₁. 
C)  the output Y₁ will tend to persist into the future unless market conditions change. 
D)  all of the above are correct.

Question 10

Steven puts money into an account. One year later he sees that he has 6 percent more dollars and that his money will buy 2 percent more goods.

Accepted Answer

A)  The nominal interest rate was 8 percent and the inflation rate was 6 percent. 
B)  The nominal interest rate was 6 percent and the inflation rate was 4 percent. 
C)  The nominal interest rate was 4 percent and the inflation rate was 2 percent. 
D)  None of the above is correct. 
A)  The nominal interest rate was 8 percent and the inflation rate was 6 percent. 
B)  The nominal interest rate was 6 percent and the inflation rate was 4 percent. 
C)  The nominal interest rate was 4 percent and the inflation rate was 2 percent. 
D)  None of the above is correct.

Question 11

The real rate of interest is

Accepted Answer

A)  interest paid by commercial banks. 
B)  interest paid by the Fed. 
C)  equal to the money rate of interest plus the inflationary premium. 
D)  the money rate of interest adjusted for inflation. 
A)  interest paid by commercial banks. 
B)  interest paid by the Fed. 
C)  equal to the money rate of interest plus the inflationary premium. 
D)  the money rate of interest adjusted for inflation.

Question 12

As prices rise, people will buy fewer goods and services because

Accepted Answer

A)  the interest rate has declined. 
B)  aggregate demand has increased. 
C)  the purchasing power of the fixed quantity of money has declined. 
D)  the income of households has increased. 
A)  the interest rate has declined. 
B)  aggregate demand has increased. 
C)  the purchasing power of the fixed quantity of money has declined. 
D)  the income of households has increased.

Question 13

Which of the following will always be true when an economy is in long-run equilibrium?

Accepted Answer

A)  The level of prices will be constant (that is, inflation will be zero). 
B)  Actual output will exceed the potential output. 
C)  The actual rate of unemployment will be less than the natural rate of unemployment. 
D)  The output of the economy will correspond with the full-employment output. 
A)  The level of prices will be constant (that is, inflation will be zero). 
B)  Actual output will exceed the potential output. 
C)  The actual rate of unemployment will be less than the natural rate of unemployment. 
D)  The output of the economy will correspond with the full-employment output.

Question 14

The difference between the money rate of interest and the real rate of interest is often called the

Accepted Answer

A)  real balance effect. 
B)  prime interest rate. 
C)  inflationary premium. 
D)  discount rate. 
A)  real balance effect. 
B)  prime interest rate. 
C)  inflationary premium. 
D)  discount rate.

Question 15

In the short run, if prices were below equilibrium,

Accepted Answer

A)  excess aggregate demand for goods and services would place downward pressure on prices. 
B)  excess aggregate supply of goods and services would place downward pressure on prices. 
C)  excess aggregate demand for goods and services would place upward pressure on prices. 
D)  excess aggregate supply of goods and services would place upward pressure on prices. 
A)  excess aggregate demand for goods and services would place downward pressure on prices. 
B)  excess aggregate supply of goods and services would place downward pressure on prices. 
C)  excess aggregate demand for goods and services would place upward pressure on prices. 
D)  excess aggregate supply of goods and services would place upward pressure on prices.

Question 16

If the foreign exchange market is in equilibrium and attractive domestic investment opportunities result in a net inflow of capital,

Accepted Answer

A)  the nation will experience a trade deficit. 
B)  the nation will experience a trade surplus. 
C)  interest rates will rise in the loanable funds market. 
D)  the actual rate of unemployment must exceed the natural rate of unemployment. 
A)  the nation will experience a trade deficit. 
B)  the nation will experience a trade surplus. 
C)  interest rates will rise in the loanable funds market. 
D)  the actual rate of unemployment must exceed the natural rate of unemployment.

Question 17

In the short run, a price increase in the goods and services market will

Accepted Answer

A)  increase the purchasing power of money. 
B)  improve producer profits and, thereby, induce suppliers to expand output. 
C)  increase resource prices, lower profits, and lead to a decline in output. 
D)  reduce the natural rate of unemployment. 
A)  increase the purchasing power of money. 
B)  improve producer profits and, thereby, induce suppliers to expand output. 
C)  increase resource prices, lower profits, and lead to a decline in output. 
D)  reduce the natural rate of unemployment.

Question 18

Ceteris paribus, a decrease in the U.S. price level will cause

Accepted Answer

A)  an increase in U.S. exports. 
B)  an increase in U.S. imports. 
C)  the aggregate demand curve to shift to the right. 
D)  the aggregate demand curve to shift to the left. 
A)  an increase in U.S. exports. 
B)  an increase in U.S. imports. 
C)  the aggregate demand curve to shift to the right. 
D)  the aggregate demand curve to shift to the left.

Question 19

Resource prices that are fixed by long-term contracts help explain why, in the short run, firms will

Accepted Answer

A)  increase output when product prices increase. 
B)  keep production levels constant when product prices decrease. 
C)  keep their product prices constant even if the demand for their good increases. 
D)  keep their product prices constant even if the demand for their good decreases. 
A)  increase output when product prices increase. 
B)  keep production levels constant when product prices decrease. 
C)  keep their product prices constant even if the demand for their good increases. 
D)  keep their product prices constant even if the demand for their good decreases.

Question 20

The difference between the money interest rate and the real interest rate is the

Accepted Answer

A)  prime interest rate. 
B)  nominal interest rate. 
C)  exchange rate. 
D)  inflationary premium. 
A)  prime interest rate. 
B)  nominal interest rate. 
C)  exchange rate. 
D)  inflationary premium.

Exam 9: A : an Introduction to Basic Macroeconomic Markets

If the nation's investment opportunities are highly attractive relative to those available abroad, the nation will tend to

In the context of aggregate supply, the short run is defined as the period during which

The four key markets in the simple AD/AS model are

A decrease in the dollar price of foreign currency would cause

In the aggregate demand and aggregate supply model,

The supply of resources, level of technology, and the quality of an economy's institutional arrangements provide the constraint that determines the shape of the

(I) If long-run equilibrium is present in the goods and services market, the current price level will equal the price level buyers and sellers anticipated. (II) When an economy is in long-run equilibrium, the actual rate of unemployment will equal the natural rate of unemployment.

Which of the following will most likely cause a decrease in short-run aggregate supply in the goods and services market?

Use the figure below to answer the following question(s). Figure 9-2 -When an economy is experiencing the aggregate demand and supply conditions depicted in Figure 9-2,

Steven puts money into an account. One year later he sees that he has 6 percent more dollars and that his money will buy 2 percent more goods.

The real rate of interest is

As prices rise, people will buy fewer goods and services because

Which of the following will always be true when an economy is in long-run equilibrium?

The difference between the money rate of interest and the real rate of interest is often called the

In the short run, if prices were below equilibrium,

If the foreign exchange market is in equilibrium and attractive domestic investment opportunities result in a net inflow of capital,

In the short run, a price increase in the goods and services market will

Ceteris paribus, a decrease in the U.S. price level will cause

Resource prices that are fixed by long-term contracts help explain why, in the short run, firms will

The difference between the money interest rate and the real interest rate is the

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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