Question 1

If expected inflation is constant,then when the nominal interest rate falls,the real interest rate

Accepted Answer

A) falls by more than the change in the nominal interest rate. 
B) falls by the change in the nominal interest rate. 
C) rises by the change in the nominal interest rate. 
D) rises by more than the change in the nominal interest rate.

Question 2

The resource market is important from a macroeconomic perspective because

Accepted Answer

A) it coordinates the allocation of productive resources and determines the costs of production. 
B) it determines the interest rates faced by borrowers and lenders. 
C) inflation rates are set in the resource market by the government. 
D) resource prices determine the position of the long-run aggregate supply curve.

Question 3

If the quantity of euro demanded were greater than the quantity supplied,then the price of the

Accepted Answer

A) euro would rise. 
B) euro would fall. 
C) dollar would rise. 
D) euro would be in equilibrium.

Question 4

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.

Question 5

The long-run aggregate supply curve is vertical,reflecting the fact that

Accepted Answer

A) changes in price have no effect on output in the long run.In the long run,the price of goods and the price of resources move together and firms have no incentive to change their output. 
B) fluctuations in inflation cannot be anticipated in the long run,so future prices have no effect on output. 
C) changes in price affect output a lot in the long run because in the long run firms can adjust factory sizes to meet changing demand conditions. 
D) changes in price have a large effect on output because they lead to highly variable interest rates,and business is hard to conduct under those circumstances.

Question 6

Tony lent Dave $1,000 for one year with the understanding that Dave would repay $1,070.If the actual inflation rate was 7 percent,what was the real rate of interest Tony received?

Accepted Answer

A) 14 percent 
B) 7 percent 
C) 4 percent 
D) 0 percent 
E) -7 percent

Question 7

The exchange rate is

Accepted Answer

A) the price of one nation's currency in terms of the currency of another nation. 
B) the amount households will spend on imports. 
C) the amount of foreign capital a nation receives when there is a trade surplus. 
D) the amount charged by bankers for loanable funds

Question 8

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.

Question 9

What is the difference between short-run equilibrium and long-run equilibrium in the goods and services market?

Accepted Answer

The answer of What is the difference between short-run equilibrium...

Question 10

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.

Question 11

Suppose business decision makers become more optimistic about future economic conditions and desire additional funds to expand their plant capacity.What is the likely effect on the loanable funds market?

Accepted Answer

A) The demand for loanable funds will rise and the interest rate will rise. 
B) The demand for loanable funds will fall and the interest rate will fall. 
C) The supply for loanable funds will rise and the interest rate will fall. 
D) The supply for loanable funds will fall and the interest rate will rise.

Question 12

In the AD/AS model,the aggregate demand for goods and services is composed of the purchases made by

Accepted Answer

A) households and foreigners (net exports). 
B) businesses,bondholders,and foreigners (net exports). 
C) businesses and governments. 
D) consumers,investors,governments,and foreigners (net exports).

Question 13

Arnold puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

Accepted Answer

A) The nominal interest rate was 11 percent and the inflation rate was 5 percent. 
B) The nominal interest rate was 6 percent and the inflation rate was 5 percent. 
C) The nominal interest rate was 5 percent and the inflation rate was -1 percent. 
D) None of the above is correct.

Question 14

The market that coordinates the exchange of productive inputs between the household and business sectors is the

Accepted Answer

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

Question 15

An increase in the real interest rate will

Accepted Answer

A) increase the inflationary premium. 
B) decrease the inflationary premium. 
C) increase the price of current consumption relative to future consumption. 
D) decrease the price of current consumption relative to future consumption.

Question 16

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.

Question 17

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 18

The inflationary premium is that portion of the interest rate that reflects

Accepted Answer

A) the real return derived by lenders. 
B) the rush to buy goods before prices rise. 
C) the expected annual rate of decline in the purchasing power of money while a loan is outstanding. 
D) the price that one must pay for earlier availability of goods and services during a period of price stability.

Question 19

Your grandmother gives you a $100 savings bond that will mature in fifteen years.The bank tells you that they will buy it from you today at a price of $24.If interest rates rise in the near future,the value of your bond

Accepted Answer

A) will fall and it will be worth less than $24. 
B) will rise and it will be worth more than $24. 
C) will remain unchanged at $24. 
D) This is a trick question;the value of a $100 bond is always $100.

Question 20

A positive level of net exports contributes directly to

Accepted Answer

A) demand in the resources market. 
B) supply in the loanable funds market. 
C) demand in the loanable funds market. 
D) demand in the goods and services market.

Exam 9: Aan Introduction to Basic Macroeconomic Markets