Question 1

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 2

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 3

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.

Question 4

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.

Question 5

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.

Question 6

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.

Question 7

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 8

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.

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)   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 10

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 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.

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.

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

Question 14

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 15

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.

Question 16

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.

Question 17

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%.

Question 18

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.

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.

Question 20

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.

Exam 9: A : an Introduction to Basic Macroeconomic Markets

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

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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

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The market for labor services is included in the

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The aggregate demand curve indicates the relationship between

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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,

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If net exports are positive, then

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

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Other things equal, which of the following is true?

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

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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

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Which of the following is a correct statement?

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

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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?

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

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

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The aggregate demand curve slopes downward indicating that

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

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

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

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

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