Question 1

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.

Question 2

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

Question 3

If the dollar appreciates relative to the Yen,it can be said that

Accepted Answer

A) Japanese citizens respect the United States more. 
B) the dollar increases in value within the United States. 
C) the Yen depreciates relative to the dollar. 
D) it takes more dollars to buy Yen.

Question 4

Which of the following is not included in aggregate demand?

Accepted Answer

A) purchases of stock and bonds 
B) purchases of services such as visits to the doctor 
C) purchases of capital goods such as equipment in a factory 
D) purchases by foreigners of consumer goods produced in the United States

Question 5

Suppose that severe floods destroyed farms,homes,and businesses in the Midwest.Use the aggregate demand/aggregate supply model,to explain the changes you would expect to take place and the effects you would expect these floods to have on both output and prices.(Include both short-run and long-run effects. )

Accepted Answer

The answer of Suppose that severe floods destroyed farms,homes,and businesses...

Question 6

A vertical long-run aggregate supply curve indicates that

Accepted Answer

A) an increase in the price level will not expand an economy's output capacity in the long run. 
B) outputs greater than the long-run supply constraint cannot be achieved. 
C) an increase in the price level will permit the economy to achieve a higher level of output. 
D) an increase in the price level will promote technological change and more rapid economic growth.

Question 7

Suppose U.S.consumers start buying more English shoes and fewer U.S.shoes.What impact will this trend have on the foreign exchange market?

Accepted Answer

A) The U.S.overall demand for foreign exchange,and British pounds,in particular,will increase. 
B) The U.S.overall demand for foreign exchange,and British pounds,in particular,will decrease. 
C) The U.S.demand for British pounds will increase,but the overall demand for foreign exchange will probably decrease. 
D) The U.S.demand for British pounds will decrease,but the overall demand for foreign exchange will probably increase.

Question 8

As prices rise,a fixed money supply will be able to buy fewer goods and services.This effect is due to a(n)

Accepted Answer

A) reduction in the interest rate. 
B) increase in aggregate demand. 
C) decline in the purchasing power of money. 
D) increase in income.

Question 9

When the exchange rate is determined by market forces and an economy is experiencing a net inflow of capital,the economy will tend to

Accepted Answer

A) run a budget deficit. 
B) run a trade deficit. 
C) experience an increase in the supply of money. 
D) experience a reduction in the supply of money.

Question 10

Saving is

Accepted Answer

A) the sum of the funds people hold in their checking accounts. 
B) after-tax income that is not spent on consumption. 
C) always equal to consumption. 
D) equal to disposable income plus consumption.

Question 11

Which two submarkets are included in the resource market?

Accepted Answer

A) labor and loanable funds 
B) physical capital and labor 
C) consumption goods and bonds 
D) loanable funds and exports

Question 12

If net exports are negative,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.

Question 13

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.

Question 14

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 15

Which of the following is necessarily true when an economy is in long-run equilibrium?

Accepted Answer

A) Prices will be constant (that is,inflation will be zero). 
B) The actual output will be less than the full-employment (or potential)output. 
C) The actual rate of unemployment equals the natural rate of unemployment. 
D) The output of the economy will be greater than the full-employment output.

Question 16

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

Accepted Answer

A) operating at less than full employment. 
B) operating at more than full employment. 
C) in short-run equilibrium but not long-run equilibrium. 
D) in long-run equilibrium.

Question 17

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.

Question 18

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 19

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.

Question 20

If there is a shortage of loanable funds,then

Accepted Answer

A) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B) the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D) the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.

Exam 9: Aan Introduction to Basic Macroeconomic Markets