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1. News Story: Workers at a car-manufacturing plant in Flint, Michigan are laid off because the economy is weak and GM cars aren't selling well. GM isn't sure when the plant will reopen. What type of unemployment describes the workers' situation?
2. If banks hold excess reserves whereas before they did not, the money multiplier:
Will become smaller
Will become larger
Might increase or might decrease
Will be unaffected
3. The interest rate is the price paid for use of a:
4. Suppose farmers can use their land to grown either wheat or corn. The law of supply predicts that an increase in the market price of wheat will cause:
Farmers to substitute wheat for the production of corn.
Farmers to raise the production of corn and wheat.
Farmers to lower the production of corn and wheat.
Farmers to substitute corn for the production of wheat.
5. According to the Classical growth model, an economy that increases its saving will grow:
Quickly since the increase in saving will permit greater investment.
Quickly since the increase in saving will permit more rapid technological progress.
Slowly because interest rates will fall, causing investment to decline.
Slowly because consumption and aggregate demand will be reduced.
6. Which of the following topics is best characterized as a macroeconomic issue?
The effect of a drought on the price of corn
The decision by Apple to produce fewer Macintosh computers
The effect of an increase in federal spending on the unemployment rate
The choice a student makes in selecting college course
7. In which of the following situations is a budget surplus most likely to occur?
When fiscal policy is contractionary and the economy is expanding
When fiscal policy is expansionary and the economy is contracting
When fiscal policy is expansionary
When the economy is contracting
8. The largest expenditure component of GDP is:
9. As a country develops economically, what changes usually take place in the goods it exports?
There is little change because comparative advantage does not change.
Exports go from being diversified to being specialized in whatever the country finds to its comparative advantage.
Services and manufactured goods decline in importance and are replaced by raw materials and agricultural products.
Raw materials and agricultural products decline in importance and are replaced by services and manufactured goods.
10. The depreciation of currency will:
Balance a trade surplus.
Have no impact on a country's comparative advantage.
Worsen a country's comparative advantage.
Improve a country's comparative advantage.
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