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. Globalization that allows governments to pursue expansionary policies can be dangerous because it can lead to:
A reduction in the debt ceiling
Goods price inflation
Asset price inflation
Goods price deflation
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3. Macroeconomics is:
The study of aggregate economic relationships.
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They have the same effects on output but investments in technology are much more closely tied to the level of saving than investments in capital.
They have different effects on output because of the positive externalities associated with investments in capital.
They have different effects on output because of the positive externalities associate with investments in technology.
8. The interest rate is the price paid for use of a:
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9. If the reserve requirement is 20 percent, and banks keep no excess reserves, an increase in an initial inflow of $100 into the banking system will cause an increase in the money supply of:
10. 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.
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11. According to Keynes, why might deflation create problems for an economy?
In expectation of increased spending, too many entrepreneurs would begin businesses and most would fail.
The cost of repricing goods would increase costs, and therefore reduce profits, for businesses and they would cut production.
People would drop out of unions because unions would become ineffective at keeping wages of members high.
Consumers might expect prices to fall further and cut back consumption now.
12. When interest rates rise, people are:
More likely to borrow, that is, purchase a financial asset.
More likely to borrow, that is, sell a financial asset.
Less likely to borrow, that is, sell a financial asset.
Less likely to borrow, that is, purchase a financial asset.
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13. 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.
14. Suppose that consumer spending is expected to decrease in the near future. If output is at potential output, which of the following policies is most appropriate according to the AS/AD model?
A reduction in government spending
An increase in taxes
An increase in government spending
No change in taxes or government spending
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15. Which of the following topics is best characterized as a macroeconomic issue?