2. Suppose that a million university students graduate this year and immediately start part-time jobs. In this case, the labor force and the unemployment rate (a) Increases; Decreases (b) Stays the same; Stays the same; (c) Stays the same; Increases (a) Increases; Increases 3. To maintain a fixed-exchange-rate system, if there is a negative shock to demand for the domestic cur- rency, then the central bank must_ foreign currency; this causes the domestic money supply to (a) buy ; rise (b) sell ; fall (c) sell ; rise (a) buy ; fall 4. Suppose that the expected marginal product of capital (MPK) in Canada were to suddenly increase. If capital flows freely across countries, the trade deficit will ? (a) not change, because the trade deficit is determined by exports and imports; capital has nothing to do with it. (b) increase, because higher expected MPK will cause net national savings to fall. (c) decrease because higher expected MPK will cause net national savings to fall. (a) decrease because higher expected MPK will cause net national savings to rise. (e) increase because higher expected MPk will cause net national savings to rise. 5. Which factor input is more important, in per-capita terms, for explaining GDP variation over the business cycle, capital or labor? (a) Labor, because labor per capita is limited by working hours per day. (b) Capital, because investment fluctuations are much smaller than the capital stock. (c) Labor, because investment fluctuations are much smaller than the capital stock. (d) Capital, because labor per capita is limited by working hours per day