Question 1

Businesses borrow money because they

Accepted Answer

A)  have no immediate spending use for it. 
B)  try to find expensive financing for their investment projects. 
C)  hope to make a profit by using the funds to invest in new plant and equipment. 
D)  have no immediate investment use for it. 
A)  have no immediate spending use for it. 
B)  try to find expensive financing for their investment projects. 
C)  hope to make a profit by using the funds to invest in new plant and equipment. 
D)  have no immediate investment use for it.

Question 2

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30;    r = 10,

Accepted Answer

A)      I would equal $180 billion. 
B)      I would equal -$180 billion. 
C)      I would equal $1800 billion. 
D)      I would equal -$1800 billion. 
A)      I would equal $180 billion. 
B)      I would equal -$180 billion. 
C)      I would equal $1800 billion. 
D)      I would equal -$1800 billion.

Question 3

The market in which the real interest rate functions as the price is called

Accepted Answer

A)  the foreign exchange market. 
B)  the stock market. 
C)  the bond market. 
D)  the market for loanable funds. 
A)  the foreign exchange market. 
B)  the stock market. 
C)  the bond market. 
D)  the market for loanable funds.

Question 4

If there is an excess demand for loanable funds in the financial markets

Accepted Answer

A)  the real interest rate will increase. 
B)  the real exchange rate will decrease. 
C)  the real interest rate will decrease. 
D)  the real wage will increase. 
A)  the real interest rate will increase. 
B)  the real exchange rate will decrease. 
C)  the real interest rate will decrease. 
D)  the real wage will increase.

Question 5

The equilibrium interest rate will ________ if foreign real income increases and the sensitivity of investment to the interest rate decreases.

Accepted Answer

A)  decrease 
B)  remain unchanged 
C)  increase 
D)  either increase or decrease, depending which effect dominates. 
A)  decrease 
B)  remain unchanged 
C)  increase 
D)  either increase or decrease, depending which effect dominates.

Question 6

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30;    r = 10,

Accepted Answer

A)      r would equal 2%. 
B)      r would equal -2%. 
C)      r would equal .02%. 
D)      r would equal 3.27%. 
A)      r would equal 2%. 
B)      r would equal -2%. 
C)      r would equal .02%. 
D)      r would equal 3.27%.

Question 7

If the real interest rate ________, total saving will _________ because ________.

Accepted Answer

A)  decreases; increase; government saving will increase 
B)  decreases; decrease; foreign saving will decrease 
C)  increases; increase; household saving will increase 
D)  decreases; remain the same; household saving will remain the same 
A)  decreases; increase; government saving will increase 
B)  decreases; decrease; foreign saving will decrease 
C)  increases; increase; household saving will increase 
D)  decreases; remain the same; household saving will remain the same

Question 8

If the real interest rate ________, total saving will _________ because ________.

Accepted Answer

A)  increases; increase; household saving will increase 
B)  decreases; increase; foreign saving will increase 
C)  decreases; remain the same; government saving will remain the same 
D)  increases; increase; foreign saving will increase 
A)  increases; increase; household saving will increase 
B)  decreases; increase; foreign saving will increase 
C)  decreases; remain the same; government saving will remain the same 
D)  increases; increase; foreign saving will increase

Question 9

The change in net exports (   NX) which occurs as a result of a change in government purchases (   G) is equal to

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 10

In the flexible-price model, an increase in the household or foreign saving will result in

Accepted Answer

A)  an increase in the interest rate. 
B)  a decrease in investment expenditures. 
C)  a decrease in the interest rate. 
D)  an increase in potential output. 
A)  an increase in the interest rate. 
B)  a decrease in investment expenditures. 
C)  a decrease in the interest rate. 
D)  an increase in potential output.

Question 11

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30;    r = 10,

Accepted Answer

A)      S would equal $180 billion. 
B)      S would equal -$180 billion. 
C)      S would equal $1800 billion. 
D)      S would equal -$1800 billion. 
A)      S would equal $180 billion. 
B)      S would equal -$180 billion. 
C)      S would equal $1800 billion. 
D)      S would equal -$1800 billion.

Businesses borrow money because they

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,

The market in which the real interest rate functions as the price is called

If there is an excess demand for loanable funds in the financial markets

The equilibrium interest rate will ________ if foreign real income increases and the sensitivity of investment to the interest rate decreases.

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,

If the real interest rate ____, total saving will _ because ____.

If the real interest rate ____, total saving will _ because ____.

The change in net exports ( NX) which occurs as a result of a change in government purchases ( G) is equal to

In the flexible-price model, an increase in the household or foreign saving will result in

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 7: Equilibrium in the Flexible-Price M Odel

Businesses borrow money because they

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30; r = 10,

The market in which the real interest rate functions as the price is called

If there is an excess demand for loanable funds in the financial markets

The equilibrium interest rate will ________ if foreign real income increases and the sensitivity of investment to the interest rate decreases.

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30; r = 10,

If the real interest rate ________, total saving will _________ because ________.

If the real interest rate ________, total saving will _________ because ________.

The change in net exports ( NX) which occurs as a result of a change in government purchases ( G) is equal to

In the flexible-price model, an increase in the household or foreign saving will result in

Suppose there is an increase in government purchases of $300 billion. If Cy = .8; Ir = 9000; X = 600; t = .30; r = 10,

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,

If the real interest rate ____, total saving will _ because ____.

If the real interest rate ____, total saving will _ because ____.

Suppose there is an increase in government purchases of $300 billion. If C_y = .8; I_r = 9000; X = 600; t = .30; _r= 10,