Chapter 9 Flashcards
Within the aggregate demand/aggregate supply framework, the quantity on the horizontal axis in the aggregate goods and services market represents the
a. total amount of government spending
b. total real output (real GDP) of the economy
c. total unemployment of the economy
d. price level of the economy
b. total real output (real GDP) of the economy
In the loanable funds market, the true burden of borrowers and the true yield to lenders is the
a. real (inflation-adjusted) interest rate
b. nominal (money) interest rate
c. inflation rate
d. inflation premium rate (in money terms)
a.
When AD is equal to SRAS at an output level equal to the LRAS curve,
a. we are at long-run macroeconomic equilibrium
b. we are at the natural unemployment rate
c. both a and b are true
d. neither a nor b is true.
c.
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 the interest rate rises in the near future, the value of your bond
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
a.
If the expected rate of inflation is zero, the
a. real interest rate must also equal zero
b. money (nominal) interest rate must also equal zero
c. real interest rate must equal the money interest rate
d. economy is likely to experience high inflation in the near future
c.
Which of the following is the primary factor that coordinates the actions of borrowers and lenders in the loanable funds market
a. inflation rate
b. unemployment rate
c. the government
d. interest rate
d.
Which of the following statements about the circular flow diagram is not correct?
a. Households receive income from the resource market; they save some of it and spend the rest of it on domestic or foreign goods and services
b. The loanable funds market takes net household savings and channels it in part to the government and in part to businesses for investment
c. Expenditures on GDP are equal to consumption plus government purchases plus investment plus net exports (exports minus imports)
d. The net inflow of capital from foreign economies must always be positive and equal to the amount of business investment.
d.
The circular flow of income is coordinated by the
a. goods and services market, resource market, foreign exchange market, and loanable funds market
b. consumption market, investment market, stock market, and government market
c. government market, household goods market, bond market, and business market
d. financial market, corporation market, stock market, and loanable funds market
a.
As prices rise, a fixed money supply will be able to buy fewer goods and services. This effect Is due to an
a. reduction in the interest rate
b. increase in aggregate demand
c. decline in the purchasing power of money
d. increase in income
c.
Suppose people anticipate that inflation will be 4 percent during the next several years. If the real rate of interest is 5 percent, the money rate of interest must be
a. 1 percent
b. 4 percent
c. 5 percent
d. 9 percent
d.
Suppose you are earning 5% nominal interest on your savings account. If the rate of inflation is 3% the real rate of interest you are earning is
a. 2%
b. 3%
c. 5%
d. 8%
a.
In 1999, the nominal interest rate on a 30-year bond was around 5.85 percent. Assuming that investors have set these contacts expecting a real interest rate of 3%, what is the average rate of inflation that investors in the market are expecting over the next thirty years?
a. 2.85%
b. 3%
c. 5.85%
d. 8.85%
a.
Which of the following situations would you prefer if you planned to borrow money?
a. The nominal interest rate is 5% and future prices are expected to be stable.
b. The nominal interest rate is 9% and expected inflation is 7%
c. The nominal interest rate is 4% and expected inflation is 1%
d. The nominal interest rate is 25% and expected inflation is 22%
b.
If the dollar price of the English pound goes from $1.50 to $2.00, the dollar has
a. appreciated, the English will find US goods cheaper
b. appreciated, the English will find US goods more expensive
c. depreciated, the English will find US goods cheaper
d. Depreciated, the English will find US goods more expensive
c.
A depreciation of a nation’s currency would cause
a. the nation’s imports to increase and exports to decline
b. the nation’s exports to increase and imports to decline
c. both imports and exports decline
d. both imports and exports rise
b.
If the value of a nation’s imports exceeds exports the nation has a
a. government budget deficit
b. trade surplus
c. trade deficit
d. negative net capital flow
c.
The long run aggregate supply curve is verticle reflecting the fact that
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 larger effect on output because they lead to highly variable interest rates and business is hard to conduct under those circumstances.
a.
Which of the following accurately indicated the relationship between the SRAS and LRAS curves?
a. In the short run SRAS is sloped upward to the right and in the long run it is vertical
b. In the short run, SRAS is vertical and in the long run, it is sloped upward to the right
c. In the short run, SRAS is downward sloping but in the long run, it is sloped upward to the right
d. In the short run SRAS is sloped upward to the right but in the long run it is downward sloping
a.
If the current price level in the goods and services market is higher than what was expected, the output will be
a. at the economy’s long-run capacity
b. below the economy’s long-run capacity
c. above the economy’s long-run capacity
d. equal to the expected rate of inflation minus net exports
c.
A trade surplus is when
a. imports are greater than exports of goods and services
b. exports are greater than imports of goods and services
c. imports are equal to exports of goods and services
d. there is a positive net inflow of foreign capital
b.
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?
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 of loanable funds will rise and the interest rate will fall
d. The supply of loanable funds will fall and the interest rate will rise.
a.
(T or F) When Intrest rates go down aggregate demand increases
True
(T or F) When RGDP increases so does unemployment
False
