Mercer University
Econ 151: Principles of Macroeconomics
Homework 03_ Answers
Name: Student ID: 1) As the real interest rate in the domestic loanable funds market increases, a. | the cost of purchasing goods and services during the current period will decrease. | 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. | a trade surplus will occur. |

ANS: B 2) Monetary policy can be most accurately described as a. | the use of government taxation and expenditures to achieve macroeconomic goals. | b. | the use of the government's regulatory powers to improve economic efficiency. | c. | the government provision of goods to improve economic efficiency. | d. | the deliberate control of the money supply to achieve macroeconomic goals. |

ANS: D 3) The use of government taxation and expenditures to achieve macroeconomic goals is called a. | cyclical policy. | b. | monetary policy. | c. | fiscal policy. | d. | industrial policy. |

ANS: C 4) As the U.S. price level rises relative to price levels in other countries, what would happen in the U.S.? a. | consumption and net exports would decline | b. | consumption and net exports would increase | c. | consumption would increase and net exports would decrease | d. | consumption would decrease and net exports would increase | e. | consumption and net exports would remain constant |

ANS: A 5) Which of the following is not included in aggregate demand? a. | purchases of stock and bonds | b. | purchases of services such as visits to the doctor | c. | purchases of capital goods such as equipment in a factory | d. | purchases by foreigners of consumer goods produced in the United States |

ANS: A 6) Which of the following helps explain why the aggregate demand