Q: If a country's nominal GDP is $$2,000$$ billion and the GDP deflator is $$125$$, what is the real GDP?

$$Real\ GDP = \frac{Nominal\ GDP}{GDP\ Deflator} \times 100 = \frac{2000}{125} \times 100 = 1600$$ billion

Q: A car cost $$20,000 in 2010 ($$CPI = 100). If the CPI in 2020 is $$130$$, what is the adjusted price of the car in 2020 dollars?

$$Adjusted\ Price = Original\ Price \times \frac{CPI_{target}}{CPI_{base}} = 20,000 \times \frac{130}{100} = 26,000$$

Q: In a country, there are $$8$$ million unemployed people and a labor force of $$80$$ million. What is the unemployment rate?

$$Unemployment\ Rate = \frac{Unemployed}{Labor\ Force} \times 100 = \frac{8}{80} \times 100 = 10\%$$

Q: A country has $$60$$ million adults, of which $$45$$ million are in the labor force. What is the labor force participation rate?

$$LFPR = \frac{Labor\ Force}{Adult\ Population} \times 100 = \frac{45}{60} \times 100 = 75\%$$

Q: An individual earns $$60,000$$ per year. The marginal tax system taxes the first $$20,000 at$$ $$10\%$$, the next $$20,000 at$$ $$20\%$$, and the remaining at $$30\%. $$What is the total tax paid?

$$Tax = (20,000 \times 0.10) + (20,000 \times 0.20) + (20,000 \times 0.30) = 2,000 + 4,000 + 6,000 = 12,000$$

Question 1

Suppose a country has the following annual data: Consumption ($$C$$) = $$500$$ billion, Investment ($$I$$) = $$200$$ billion, Government Spending ($$G$$) = $$150$$ billion, Exports ($$X$$) = $$100$$ billion, and Imports ($$M$$) = $$120$$ billion. Using the expenditure approach, what is the country's GDP?

Accepted Answer

$$GDP = C + I + G + (X - M) = 500 + 200 + 150 + (100 - 120) = 830$$ billion

Question 2

If a country's nominal GDP is $$2,000$$ billion and the GDP deflator is $$125$$, what is the real GDP?

Accepted Answer

$$Real\ GDP = \frac{Nominal\ GDP}{GDP\ Deflator} 	imes 100 = \frac{2000}{125} 	imes 100 = 1600$$ billion

Question 3

A country has a GDP of $$1,000$$ billion and a population of $$50$$ million. What is its GDP per capita?

Accepted Answer

$$GDP\ per\ capita = \frac{GDP}{Population} = \frac{1,000,000,000,000}{50,000,000} = 20,000$$

Question 4

If the Consumer Price Index (CPI) was $$120$$ last year and is $$132$$ this year, what is the inflation rate?

Accepted Answer

$$Inflation\ Rate = \frac{CPI_{new} - CPI_{old}}{CPI_{old}} 	imes 100 = \frac{132 - 120}{120} 	imes 100 = 10\%$$

Question 5

A car cost $$20,000 in 2010 ($$CPI = 100). If the CPI in 2020 is $$130$$, what is the adjusted price of the car in 2020 dollars?

Accepted Answer

$$Adjusted\ Price = Original\ Price 	imes \frac{CPI_{target}}{CPI_{base}} = 20,000 	imes \frac{130}{100} = 26,000$$

Question 6

In a country, there are $$8$$ million unemployed people and a labor force of $$80$$ million. What is the unemployment rate?

Accepted Answer

$$Unemployment\ Rate = \frac{Unemployed}{Labor\ Force} 	imes 100 = \frac{8}{80} 	imes 100 = 10\%$$

Question 7

A country has $$60$$ million adults, of which $$45$$ million are in the labor force. What is the labor force participation rate?

Accepted Answer

$$LFPR = \frac{Labor\ Force}{Adult\ Population} 	imes 100 = \frac{45}{60} 	imes 100 = 75\%$$

Question 8

An individual earns $$60,000$$ per year. The marginal tax system taxes the first $$20,000 at$$ $$10\%$$, the next $$20,000 at$$ $$20\%$$, and the remaining at $$30\%. $$What is the total tax paid?

Accepted Answer

$$Tax = (20,000 	imes 0.10) + (20,000 	imes 0.20) + (20,000 	imes 0.30) = 2,000 + 4,000 + 6,000 = 12,000$$

Question 9

If a basket of goods costs $$100 in $$the US and the same basket costs $$120 in $$the UK, what is the implied PPP exchange rate (USD/GBP)?

Accepted Answer

$$PPP\ Exchange\ Rate = \frac{Cost\ in\ US}{Cost\ in\ UK} = \frac{100}{120} = 0.833$$

Question 10

A country's real GDP was $$1,500$$ billion last year and $$1,650$$ billion this year. What is the real GDP growth rate?

Accepted Answer

$$Real\ GDP\ Growth\ Rate = \frac{Real\ GDP_{new} - Real\ GDP_{old}}{Real\ GDP_{old}} 	imes 100 = \frac{1,650 - 1,500}{1,500} 	imes 100 = 10\%$$

Question 11

If the CPI in 2015 was $$150$$ and in 2020 it is $$180$$, what is the total percentage increase in prices over this period?

Accepted Answer

$$\frac{180 - 150}{150} 	imes 100 = 20\%$$

Question 12

A country has a labor force of $$40$$ million and $$4$$ million are unemployed. If the adult population is $$50$$ million, what is the labor force participation rate?

Accepted Answer

$$LFPR = \frac{Labor\ Force}{Adult\ Population} 	imes 100 = \frac{40}{50} 	imes 100 = 80\%$$

Question 13

If the nominal GDP of a country increases by $$5\% in a $$year, but the GDP deflator increases by $$3\%$$, what is the approximate real GDP growth rate?

Accepted Answer

$$Real\ GDP\ Growth\ Rate \approx Nominal\ GDP\ Growth\ Rate - GDP\ Deflator\ Growth\ Rate = 5\% - 3\% = 2\%$$

Question 14

A worker's salary was $$40,000 in 2010 ($$CPI = 100). If the CPI in 2020 is $$125$$, what is the equivalent salary in 2020 dollars?

Accepted Answer

$$Equivalent\ Salary = 40,000 	imes \frac{125}{100} = 50,000$$

Question 15

If the cost of a basket of goods in Japan is $$15,000$$ yen and in the US is $$150$$, what is the PPP exchange rate (USD/JPY)?

Accepted Answer

$$PPP\ Exchange\ Rate = \frac{150}{15,000} = 0.01$$

Question 16

A country has a population of $$10$$ million, a labor force of $$6$$ million, and $$0.6$$ million unemployed. What is the unemployment rate?

Accepted Answer

$$Unemployment\ Rate = \frac{0.6}{6} 	imes 100 = 10\%$$

Question 17

If the price of a product was $$50 in 2000 ($$CPI = 80) and the CPI in 2020 is $$160$$, what is the adjusted price in 2020 dollars?

Accepted Answer

$$Adjusted\ Price = 50 	imes \frac{160}{80} = 100$$

Question 18

A country's real GDP increased from $$2,000$$ billion to $$2,200$$ billion in one year. What is the real GDP growth rate?

Accepted Answer

$$\frac{2,200 - 2,000}{2,000} 	imes 100 = 10\%$$

Question 19

If the labor force participation rate in a country is $$70\%$$ and the adult population is $$50$$ million, what is the size of the labor force?

Accepted Answer

$$Labor\ Force = LFPR 	imes Adult\ Population = 0.70 	imes 50,000,000 = 35,000,000$$

Core Macroeconomic Indicators and Calculations: A Study Guide

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