Question 1

Which of the following events would cause the interest rate to rise?

Accepted Answer

A) a decrease in the demand for loanable funds 
B) an increase in the demand for loanable funds 
C) an increase in the supply for loanable funds 
D) a decrease in aggregate demand 
A) a decrease in the demand for loanable funds 
B) an increase in the demand for loanable funds 
C) an increase in the supply for loanable funds 
D) a decrease in aggregate demand

Question 2

Which of the following is most likely to increase the net inflow of foreign capital?

Accepted Answer

A) an increase in the rate of inflation 
B) a decline in real GDP as the economy falls into a recession 
C) a reduction in domestic investment 
D) an increase in the real interest rate in the loanable funds market 
A) an increase in the rate of inflation 
B) a decline in real GDP as the economy falls into a recession 
C) a reduction in domestic investment 
D) an increase in the real interest rate in the loanable funds market

Question 3

Other things constant, a decrease in aggregate demand will

Accepted Answer

A) lead to a decrease in the demand for resources. 
B) cause an increase in the general level of prices. 
C) result in higher nominal wage rates. 
D) reduce the rate of unemployment. 
A) lead to a decrease in the demand for resources. 
B) cause an increase in the general level of prices. 
C) result in higher nominal wage rates. 
D) reduce the rate of unemployment.

Question 4

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. 
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 5

A depreciation in the U.S. dollar on the foreign exchange market will

Accepted Answer

A) make U.S.exports more expensive to foreigners. 
B) make imports less expensive for U.S.consumers. 
C) make U.S.exports cheaper for foreign consumers. 
D) encourage U.S.consumers to travel abroad. 
A) make U.S.exports more expensive to foreigners. 
B) make imports less expensive for U.S.consumers. 
C) make U.S.exports cheaper for foreign consumers. 
D) encourage U.S.consumers to travel abroad.

Question 6

A firm's level of investment is tied to the interest rate

Accepted Answer

A) only when the firm has to borrow funds to buy capital 
B) only when the firm has to borrow funds to buy stocks 
C) only when the firm already has the funds and could lend them 
D) because the interest rate represents the opportunity cost of investing in capital 
E) because investments are always made with borrowed funds 
A) only when the firm has to borrow funds to buy capital 
B) only when the firm has to borrow funds to buy stocks 
C) only when the firm already has the funds and could lend them 
D) because the interest rate represents the opportunity cost of investing in capital 
E) because investments are always made with borrowed funds

Question 7

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. 
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 8

People will spend more if the price level

Accepted Answer

A) rises because rising prices increase the real value of the fixed quantity of money. 
B) rises because rising prices decrease the real value of a dollar. 
C) falls because falling prices increase the real value of a dollar. 
D) falls because falling prices decrease the real value of a dollar. 
A) rises because rising prices increase the real value of the fixed quantity of money. 
B) rises because rising prices decrease the real value of a dollar. 
C) falls because falling prices increase the real value of a dollar. 
D) falls because falling prices decrease the real value of a dollar.

Question 9

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 10

What are the three reasons why the aggregate demand curve slopes downward? Give an example of each.

Accepted Answer

The real balance effect occurs because a

Question 11

Other things constant, a decrease in resource prices will lead to

Accepted Answer

A) reduced profits and a reduction in short-run aggregate supply. 
B) increased profits and a reduction in short-run aggregate supply. 
C) reduced profits and an increase in short-run aggregate supply. 
D) increased profits and an increase in short-run aggregate supply. 
A) reduced profits and a reduction in short-run aggregate supply. 
B) increased profits and a reduction in short-run aggregate supply. 
C) reduced profits and an increase in short-run aggregate supply. 
D) increased profits and an increase in short-run aggregate supply.

Question 12

As prices rise, consumers and businesses will want to hold larger money balances. This will lead to

Accepted Answer

A) a reduction in the demand for resources and reduced resource prices. 
B) an increase in the amount of goods and services demanded due to the real balance effect. 
C) an increase in exports due to the international substitution effect. 
D) a reduction in the supply of loanable funds and an increase in the interest rate. 
A) a reduction in the demand for resources and reduced resource prices. 
B) an increase in the amount of goods and services demanded due to the real balance effect. 
C) an increase in exports due to the international substitution effect. 
D) a reduction in the supply of loanable funds and an increase in the interest rate.

Question 13

When the actual GDP equals the full-employment level of GDP, the

Accepted Answer

A) economy is in long-run equilibrium. 
B) price level must be rising. 
C) expected inflation must be zero. 
D) aggregate supply curve is not constrained by the scarcity of resources. 
A) economy is in long-run equilibrium. 
B) price level must be rising. 
C) expected inflation must be zero. 
D) aggregate supply curve is not constrained by the scarcity of resources.

Question 14

Marquis borrowed $1,000 from Ayana for a year and agreed to repay her $1,050 at the end of the year. If the inflation rate was 3 percent, what is the real rate of interest Ayana received?

Accepted Answer

A) 10 percent 
B) 5 percent 
C) 3 percent 
D) 2 percent 
E) -2 percent 
A) 10 percent 
B) 5 percent 
C) 3 percent 
D) 2 percent 
E) -2 percent

Question 15

If the U.S. demand for British pounds increases,

Accepted Answer

A) the dollar price of a British pound will increase 
B) the dollar price of a British pound will decrease 
C) the exchange rate between dollars and pounds will be out of equilibrium 
D) the pound will fall in value against the dollar 
E) there will be no change in either the value of the dollar or the pound 
A) the dollar price of a British pound will increase 
B) the dollar price of a British pound will decrease 
C) the exchange rate between dollars and pounds will be out of equilibrium 
D) the pound will fall in value against the dollar 
E) there will be no change in either the value of the dollar or the pound

Question 16

The exchange rate is

Accepted Answer

A) another term for "interest rate." 
B) another term for "growth rate." 
C) the rate at which goods trade for one another across international borders. 
D) the price of one currency in terms of another currency. 
A) another term for "interest rate." 
B) another term for "growth rate." 
C) the rate at which goods trade for one another across international borders. 
D) the price of one currency in terms of another currency.

Question 17

Who among the following is most likely to favor an appreciation of the U.S. dollar?

Accepted Answer

A) a German professor visiting Chicago 
B) an American farmer who depends on exports 
C) an American professor on a tour of Austrian universities 
D) Disney World in Orlando, Florida, a popular destination for foreign tourists 
A) a German professor visiting Chicago 
B) an American farmer who depends on exports 
C) an American professor on a tour of Austrian universities 
D) Disney World in Orlando, Florida, a popular destination for foreign tourists

Question 18

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

Accepted Answer

A) There will be an inflow of capital, a currency depreciation, and increased net exports. 
B) There will be an inflow of capital, a currency depreciation, and reduced net exports. 
C) There will be an outflow of capital, a currency depreciation, and increased net exports. 
D) There will be an inflow of capital, a currency appreciation, and reduced net exports. 
A) There will be an inflow of capital, a currency depreciation, and increased net exports. 
B) There will be an inflow of capital, a currency depreciation, and reduced net exports. 
C) There will be an outflow of capital, a currency depreciation, and increased net exports. 
D) There will be an inflow of capital, a currency appreciation, and reduced net exports.

Question 19

If resource prices are fixed and the product selling price rises, then

Accepted Answer

A) profits will decrease. 
B) profits will increase. 
C) profits will remain constant. 
D) both profits and output will decrease. 
A) profits will decrease. 
B) profits will increase. 
C) profits will remain constant. 
D) both profits and output will decrease.

Question 20

If both borrowers and lenders anticipate the rate of inflation correctly, then

Accepted Answer

A) borrowers will lose real income. 
B) lenders will lose real income. 
C) both borrowers and lenders will lose real income. 
D) neither borrowers nor lenders will lose real income. 
A) borrowers will lose real income. 
B) lenders will lose real income. 
C) both borrowers and lenders will lose real income. 
D) neither borrowers nor lenders will lose real income.

Which of the following events would cause the interest rate to rise?

Which of the following is most likely to increase the net inflow of foreign capital?

Other things constant, a decrease in aggregate demand will

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

A depreciation in the U.S. dollar on the foreign exchange market will

A firm's level of investment is tied to the interest rate

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

People will spend more if the price level

In the short run, if prices were below equilibrium,

What are the three reasons why the aggregate demand curve slopes downward? Give an example of each.

Other things constant, a decrease in resource prices will lead to

As prices rise, consumers and businesses will want to hold larger money balances. This will lead to

When the actual GDP equals the full-employment level of GDP, the

Marquis borrowed $1,000 from Ayana for a year and agreed to repay her $1,050 at the end of the year. If the inflation rate was 3 percent, what is the real rate of interest Ayana received?

If the U.S. demand for British pounds increases,

The exchange rate is

Who among the following is most likely to favor an appreciation of the U.S. dollar?

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

If resource prices are fixed and the product selling price rises, then

If both borrowers and lenders anticipate the rate of inflation correctly, then

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

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

Filters

Exam 9: An Introduction to Basic Macroeconomic Markets

Which of the following events would cause the interest rate to rise?

Which of the following is most likely to increase the net inflow of foreign capital?

Other things constant, a decrease in aggregate demand will

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

A depreciation in the U.S. dollar on the foreign exchange market will

A firm's level of investment is tied to the interest rate

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

People will spend more if the price level

In the short run, if prices were below equilibrium,

What are the three reasons why the aggregate demand curve slopes downward? Give an example of each.

Other things constant, a decrease in resource prices will lead to

As prices rise, consumers and businesses will want to hold larger money balances. This will lead to

When the actual GDP equals the full-employment level of GDP, the

Marquis borrowed $1,000 from Ayana for a year and agreed to repay her $1,050 at the end of the year. If the inflation rate was 3 percent, what is the real rate of interest Ayana received?

If the U.S. demand for British pounds increases,

The exchange rate is

Who among the following is most likely to favor an appreciation of the U.S. dollar?

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

If resource prices are fixed and the product selling price rises, then

If both borrowers and lenders anticipate the rate of inflation correctly, then

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

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

Filters