Q: Suppose the nominal GDP of a country increases from $$\1$ trillion to $$\$$1.1$$ trillion, while the GDP deflator rises from $$100 to$$ $$105. $$What is the real GDP growth rate?

$$\frac{1.1\text{ trillion}}{105} \div \frac{1\text{ trillion}}{100} - 1 \approx 4.76\%$$

Q: If the government increases its spending by $$\100$ million and the marginal propensity to consume (MPC) is 0.8$, what is the total increase in aggregate demand according to the simple multiplier?

$$\frac{1}{1-0.8} \times 100\text{ million} = 500\text{ million}$$

Question 1

Which of the following best describes the concept of Gross Domestic Product (GDP)?

Accepted Answer

The total value of all final goods and services produced within a country's borders in a given period.

Question 2

Suppose the nominal GDP of a country increases from $$\1$ trillion to $$\$$1.1$$ trillion, while the GDP deflator rises from $$100 to$$ $$105. $$What is the real GDP growth rate?

Accepted Answer

$$\frac{1.1	ext{ trillion}}{105} \div \frac{1	ext{ trillion}}{100} - 1 \approx 4.76\%$$

Question 3

If the unemployment rate is 6\% and the labor force participation rate is 70\%, which of the following statements is correct?

Accepted Answer

6\% of the labor force is unemployed, and 70\% of the working-age population is in the labor force.

Question 4

Which of the following is NOT included in the calculation of GDP using the expenditure approach?

Accepted Answer

Purchases of stocks and bonds by households.

Question 5

The Consumer Price Index (CPI) is used to measure:

Accepted Answer

The average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Question 6

If the government increases its spending by $$\100$ million and the marginal propensity to consume (MPC) is 0.8$, what is the total increase in aggregate demand according to the simple multiplier?

Accepted Answer

$$\frac{1}{1-0.8} 	imes 100	ext{ million} = 500	ext{ million}$$

Question 7

Which of the following best explains why frictional unemployment exists in an economy?

Accepted Answer

Workers are temporarily between jobs or searching for new jobs that better match their skills.

Question 8

Suppose the central bank increases the money supply. According to the quantity theory of money, what is the likely long-run effect on the price level?

Accepted Answer

The price level will increase proportionally to the increase in the money supply.

Question 9

Which equation represents the relationship described by the quantity theory of money?

Accepted Answer

$$M 	imes V = P 	imes Y$$

Question 10

If the real interest rate is 3\% and the expected inflation rate is 2\%, what is the nominal interest rate according to the Fisher equation?

Accepted Answer

$$3\% + 2\% = 5\%$$

Question 11

Which of the following policies would be considered contractionary fiscal policy?

Accepted Answer

Increasing taxes and reducing government spending.

Question 12

Suppose the economy is experiencing high inflation. Which monetary policy action is most appropriate?

Accepted Answer

Increase the policy interest rate to reduce aggregate demand.

Question 13

If the exchange rate changes from $$1.25$$ USD/CAD to $$1.30$$ USD/CAD, which of the following is true?

Accepted Answer

The Canadian dollar has depreciated relative to the US dollar.

Question 14

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker loses their job because the factory relocates overseas.

Question 15

If the government runs a budget deficit, which of the following is most likely to occur in the loanable funds market?

Accepted Answer

The demand for loanable funds increases, leading to higher interest rates.

Question 16

Which of the following best describes the concept of potential output (Y*) in macroeconomics?

Accepted Answer

The level of output an economy can produce when operating at full employment.

Question 17

Suppose the aggregate demand curve shifts to the right. Which of the following is the most likely short-run effect?

Accepted Answer

Real GDP increases and the price level rises.

Question 18

Which formula is used to calculate the unemployment rate?

Accepted Answer

$$\frac{	ext{Number of unemployed}}{	ext{Labor force}} 	imes 100$$

Question 19

If the MPC is $$0.75$$, what is the value of the simple spending multiplier?

Accepted Answer

$$\frac{1}{1-0.75} = 4$$

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