Question 1

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.

Question 2

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.

Question 3

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.

Question 4

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.

Question 5

Controlling the money supply to achieve desired macroeconomic goals is called

Accepted Answer

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

Question 6

The resource market involves transactions dealing with

Accepted Answer

A) natural resources and financial services. 
B) the borrowing and lending of financial capital. 
C) the buying and selling of final goods and services. 
D) labor services, natural resources, and physical capital.

Question 7

Which of the following equations is accurate?

Accepted Answer

A) money interest rate = real interest rate - inflationary premium 
B) real interest rate = money interest rate + inflationary premium 
C) real interest rate = money interest rate - inflationary premium 
D) real interest rate = money interest rate

Question 8

When prices in the goods and services market are below the level anticipated,

Accepted Answer

A) output will temporarily exceed the economy's long-run potential. 
B) output will temporarily fall short of the economy's long-run potential. 
C) output will be equal to the economy's long-run potential. 
D) the actual rate of unemployment will be less than the natural rate of unemployment.

Question 9

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) Output equals potential real GDP. 
B) The actual rate of unemployment equals the natural rate of unemployment. 
C) The output is sustainable in the long run. 
D) All of the above statements are true.

Question 10

The actions of borrowers and lenders are coordinated by

Accepted Answer

A) the interest rate in the loanable funds market. 
B) the government in the resources market. 
C) businesses in the resources market. 
D) the interest rate in the goods and services market.

Question 11

If the expected inflation rate is 3 percent and banks charge a 10 percent money rate of interest, the real rate of interest is

Accepted Answer

A) 3 percent. 
B) 7 percent. 
C) 10 percent. 
D) 17 percent.

Question 12

The price of one country's currency in terms of another's is called

Accepted Answer

A) the interest rate. 
B) the inflationary premium. 
C) the discount rate. 
D) the exchange rate.

Question 13

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.

Question 14

In the loanable funds market, the price that borrowers must pay for earlier availability is the

Accepted Answer

A) inflation rate. 
B) wage rate. 
C) interest rate. 
D) exchange rate.

Question 15

Use the figure below to answer the following question(s).
Figure 9-2 
-The output of the economy depicted in Figure 9-2 is

Accepted Answer

A) equal to the full-employment output. 
B) greater than the full-employment output. 
C) less than the full-employment output. 
D) not sustainable in the long run.

Question 16

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.

Question 17

Other things constant, an increase in resource prices will

Accepted Answer

A) increase the demand for goods and services. 
B) increase the cost of producing goods and services, which will lead to a higher price level. 
C) reduce costs and improve profit margins, which will lead to an increase in aggregate supply in the goods and services market. 
D) cause the natural rate of unemployment to rise.

Question 18

Once decision makers fully adjust to an increase in prices,

Accepted Answer

A) the natural rate of unemployment will decline. 
B) competitive forces will restore the usual relationship between product prices and costs. 
C) producers' profits will exceed their normal level. 
D) producers will expand output beyond the economy's potential.

Question 19

If a person earns an 8 percent nominal rate of interest on his savings account in a year when inflation is 9 percent, the person's real rate of interest is

Accepted Answer

A) -1 percent. 
B) 1 percent. 
C) 8 percent. 
D) 9 percent.

Question 20

Of the following, who would most likely be hurt by an unanticipated increase in the rate of inflation?

Accepted Answer

A) an individual with a 30-year fixed-rate home mortgage loan 
B) the U.S.federal government because it has a large quantity of outstanding debt 
C) lenders who have made long-term loans at fixed interest rates 
D) Social Security recipients whose benefits are adjusted upward as the general level of prices increases

Exam 9: An Introduction to Basic Macroeconomic Markets

Other things equal, which of the following is true?

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,

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

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

Controlling the money supply to achieve desired macroeconomic goals is called

The resource market involves transactions dealing with

Which of the following equations is accurate?

When prices in the goods and services market are below the level anticipated,

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 actions of borrowers and lenders are coordinated by

If the expected inflation rate is 3 percent and banks charge a 10 percent money rate of interest, the real rate of interest is

The price of one country's currency in terms of another's is called

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

In the loanable funds market, the price that borrowers must pay for earlier availability is the

Use the figure below to answer the following question(s) . Figure 9-2 -The output of the economy depicted in Figure 9-2 is

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

Other things constant, an increase in resource prices will

Once decision makers fully adjust to an increase in prices,

If a person earns an 8 percent nominal rate of interest on his savings account in a year when inflation is 9 percent, the person's real rate of interest is

Of the following, who would most likely be hurt by an unanticipated increase in the rate of inflation?

Exam 9: An Introduction to Basic Macroeconomic Markets

Other things equal, which of the following is true?

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,

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

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

Controlling the money supply to achieve desired macroeconomic goals is called

The resource market involves transactions dealing with

Which of the following equations is accurate?

When prices in the goods and services market are below the level anticipated,

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 actions of borrowers and lenders are coordinated by

If the expected inflation rate is 3 percent and banks charge a 10 percent money rate of interest, the real rate of interest is

The price of one country's currency in terms of another's is called

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

In the loanable funds market, the price that borrowers must pay for earlier availability is the

Use the figure below to answer the following question(s) . Figure 9-2 -The output of the economy depicted in Figure 9-2 is

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

Other things constant, an increase in resource prices will

Once decision makers fully adjust to an increase in prices,

If a person earns an 8 percent nominal rate of interest on his savings account in a year when inflation is 9 percent, the person's real rate of interest is

Of the following, who would most likely be hurt by an unanticipated increase in the rate of inflation?

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