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?
§ Frictional unemployment
§ Structural unemployment
§ Full unemployment
§ Cyclical unemployment
1. 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
2. Macroeconomics is:
§ The study of aggregate economic
relationships.
§ An analysis of economic reality that
proceeds from the parts to the whole.
§ The study of pricing policies of
firms and the purchasing decisions of households.
§ The study of individual choice and
how that choice is influenced by economic forces.
3. Which of the following types of unemployment is considered to be the most
controllable through demand-side macroeconomic policy?
§ Frictional unemployment
§ Cyclical unemployment
§ Structural unemployment
§ Natural unemployment
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4. 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
5. Using the expenditure approach, gross domestic product equals:
§ The sum of consumption, investment,
government purchases, and net exports
§ Gross national product minus net
exports
§ The sum of consumption, investment,
and government purchases
§ Gross national product
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6. How do investment in technology and investment in capital differ?
§ They have similar effects on output
so they have no important differences from an economic point of view.
§ 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.
7. The interest rate is the price paid for use of a:
§ Real asset.
§ Financial liability.
§ Financial asset.
§ Real liability.
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8. 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:
§ $50
§ $100
§ $500
§ $20
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9. 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.
10.
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.
11.
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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12.
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.
13.
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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14.
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
15.
If income increases more rapidly than
expected, then:
§ Estimates of the target rate of employment
are likely to increase.
§ The budget is less likely to be in
surplus.
§ Tax revenues will be lower than
expected.
§ Spending on income-support programs
will likely be lower than expected.
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372 Week 3 DQ 1 (3 Responses)
16.
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
17.
The largest expenditure component of GDP is:
§ Government spending
§ Net exports
§ Investment
§ Consumption
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18.
Which of the following is the path through
which contractionary monetary policy works?
§ Money down implies interest rate up
implies investment up implies income down.
§ Money down implies interest rate down
implies investment down implies income down.
§ Money down implies interest rate up
implies investment down implies income down.
§ Money down implies interest rate down
implies investment up implies income down.
19.
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.
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20.
What would make foreigners want to
buy more from the United States?
§ Higher tariffs
§ Higher interest rates in the United
States
§ Inflation in the United States
§ A fall in the value of the dollar in
the foreign exchange market
21.
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.
22.
The government of Crossland wants to
influence its exchange rate. It will do so by buying and selling:
§ Currencies in its official reserves
§ Commodities
§ Goods and services from the current
account
§ Transfers
23.
If a country wants to prevent its exchange
rates from falling, it could:
§ Place restrictions on imports
§ Pursue easier monetary policy
§ Remove any subsidies on exports
§ Remove restrictions on imports
24.
Central banks are responsible for:
§ Both monetary policy and fiscal
policy
§ Monetary policy but not fiscal policy
§ Neither monetary policy nor fiscal
policy
§ Fiscal policy but not monetary policy
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25.
Quotas and tariffs can:
§ Never have the same effect on imports
and import prices.
§ Have the same effect on the price of
domestically produced goods if they are set appropriately.
§ Yield the same amount of tax revenue
if they are set appropriately.
§ Both increase international trade by
the same amount if set appropriately.
26.
Between 2007 and 2009, the U.S.
unemployment rate rose from under 5 percent to over 8 percent. A Keynesian
economist would most likely blame this increase in unemployment on:
§ An increase in the minimum wage.
§ An increase in the bargaining power
of labor unions.
§ A decline in the level of aggregate
demand.
§ A decline in aggregate supply.
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372 Week 5 Complete
27.
U.S. imports involve an:
§ Inflow of foreign currency from
foreigners to the U.S. economy
§ Inflow of dollars from foreigners to
the United States economy
§ Outflow of foreign currency from the
United States to foreigners
§ Outflow of dollars from the United
States to foreigners
28.
The law of demand states that quantity
demanded of a good is inversely related to the price of that good. Therefore,
as the price of a good goes:
§ Up, the quantity demanded goes down.
§
Down,
the quantity demanded stays the same.
§ Up, the quantity demanded also goes
up.
§ Down, the quantity demanded goes
down.
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29.
According to Keynes, market
economies:
§ Never experience significant declines
in aggregate demand.
§ Are constantly experiencing
significant declines in aggregate demand.
§ May recover slowly after they
experience a significant decline in aggregate demand.
§ Quickly recover after they experience
a significant decline in aggregate demand.
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