Q: What is the formula for calculating the unemployment rate?

Unemployment Rate = \frac{U}{E+U} \times 100

Q: If the Consumer Price Index (CPI) increases from 130.4 to 133.8 in one year, what is the rate of inflation?

$$\frac{133.8-130.4}{130.4} \times 100 = 2.6\%$$

Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative that is forgone when a choice is made.

Question 2

Suppose a government has $$12 million to spend on road repairs and new bicycle paths. If the price of 1 km of road repair is 1 $$million and 1 km of bike path is $0.5 million, what is the maximum number of kilometers of bike path that can be built if no money is spent on road repairs?

Accepted Answer

24 km

Question 3

The Production Possibilities Boundary (PPB) illustrates which three key economic concepts?

Accepted Answer

Scarcity, choice, and opportunity cost

Question 4

If a country experiences an outward shift in its production possibilities boundary (PPB), what does this indicate?

Accepted Answer

Economic growth and increased productive capacity

Question 5

Which of the following is a positive statement?

Accepted Answer

Raising interest rates encourages people to save.

Question 6

What is the formula for calculating the unemployment rate?

Accepted Answer

Unemployment Rate = \frac{U}{E+U} 	imes 100

Question 7

Which type of unemployment is caused by a mismatch between workers’ skills and the skills required for available jobs?

Accepted Answer

Structural unemployment

Question 8

Okun’s Law describes the relationship between which two macroeconomic variables?

Accepted Answer

GDP growth and unemployment rate

Question 9

If the Consumer Price Index (CPI) increases from 130.4 to 133.8 in one year, what is the rate of inflation?

Accepted Answer

$$\frac{133.8-130.4}{130.4} 	imes 100 = 2.6\%$$

Question 10

Which of the following best describes the GDP deflator?

Accepted Answer

An index number derived by dividing nominal GDP by real GDP and multiplying by 100

Question 11

Which of the following is NOT included in GDP calculations?

Accepted Answer

Illegal activities and home production

Question 12

If the consumption function is $$C = 30 + 0.8Y$$ and investment is $$I = 75$$, what is the equilibrium level of income ($$Y^*) in $$the simple macro model?

Accepted Answer

$$Y^* = \frac{30 + 75}{1 - 0.8} = 525$$

Question 13

Which of the following is a characteristic of public goods?

Accepted Answer

They are non-rivalrous and non-excludable.

Question 14

In the value added approach to measuring GDP, what is the value added by a firm?

Accepted Answer

The sales revenue minus the cost of intermediate goods.

Question 15

Which of the following would cause the consumption function to shift upward?

Accepted Answer

An increase in optimism about the future

Question 16

If investment is represented by $$I = \bar{I} + \beta Y in $$the macro model, what is the marginal propensity to spend ($$z$$)?

Accepted Answer

$$z = mpc + \beta$$

Question 17

Which of the following is a plausible consequence of price controls on goods for GDP measurement?

Accepted Answer

Price controls can lead to black markets, causing underestimation of GDP and inflation.

Question 18

Which of the following is true about the circular flow of income and expenditure?

Accepted Answer

Firms supply goods and services to households, and households supply factor services to firms.

Question 19

Which of the following is NOT a component of GDP measured by the expenditure approach?

Accepted Answer

Transfer payments

Core Concepts in Macroeconomics: Economic Issues, Theories, and Measurement

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