Q: Suppose the nominal GDP in 2022 is $$20,000$$ and the real GDP in 2022 is $$18,000. $$What is the GDP deflator for 2022?

$$\frac{20,000}{18,000} \times 100 = 111.1$$

Q: If the labor force in a country is 150 million and the number of unemployed workers is 15 million, what is the unemployment rate?

$$\frac{15}{150} \times 100 = 10\%$$

Q: If the CPI was 200 in 2020 and 210 in 2021, what was the inflation rate between 2020 and 2021?

$$\frac{210 - 200}{200} \times 100 = 5\%$$

Q: A country’s real GDP grew from $$1,000$$ billion to $$1,080$$ billion in one year. What is the economic growth rate?

$$\frac{1,080 - 1,000}{1,000} \times 100 = 8\%$$

Q: Suppose the working-age population is 200 million, the labor force is 140 million, and the number of employed workers is 126 million. What is the labor force participation rate?

$$\frac{140}{200} \times 100 = 70\%$$

Question 1

Which of the following best describes the difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP measures the value of all final goods and services at current prices, while real GDP measures them at constant base-year prices.

Question 2

Suppose the nominal GDP in 2022 is $$20,000$$ and the real GDP in 2022 is $$18,000. $$What is the GDP deflator for 2022?

Accepted Answer

$$\frac{20,000}{18,000} 	imes 100 = 111.1$$

Question 3

If the labor force in a country is 150 million and the number of unemployed workers is 15 million, what is the unemployment rate?

Accepted Answer

$$\frac{15}{150} 	imes 100 = 10\%$$

Question 4

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker loses their job because their skills are no longer needed due to automation.

Question 5

The Consumer Price Index (CPI) is used to:

Accepted Answer

Measure the average change over time in the prices paid by urban consumers for a fixed basket of goods and services.

Question 6

If the CPI was 200 in 2020 and 210 in 2021, what was the inflation rate between 2020 and 2021?

Accepted Answer

$$\frac{210 - 200}{200} 	imes 100 = 5\%$$

Question 7

Which of the following is a shortcoming of using GDP as a measure of economic well-being?

Accepted Answer

GDP does not account for the value of household production or the underground economy.

Question 8

A country’s real GDP grew from $$1,000$$ billion to $$1,080$$ billion in one year. What is the economic growth rate?

Accepted Answer

$$\frac{1,080 - 1,000}{1,000} 	imes 100 = 8\%$$

Question 9

If the nominal interest rate is $$6\%$$ and the inflation rate is $$2\%$$, what is the real interest rate?

Accepted Answer

$$6\% - 2\% = 4\%$$

Question 10

Which of the following policies is most likely to promote long-run economic growth?

Accepted Answer

Protecting property rights and maintaining a stable legal system.

Question 11

Suppose the working-age population is 200 million, the labor force is 140 million, and the number of employed workers is 126 million. What is the labor force participation rate?

Accepted Answer

$$\frac{140}{200} 	imes 100 = 70\%$$

Question 12

Which of the following best describes the concept of 'crowding out'?

Accepted Answer

An increase in government borrowing raises interest rates and reduces private investment.

Question 13

If the price level in 2010 was 120 and in 2020 it was 180, and a worker earned $$30,000 in 2010$$, what is the equivalent amount in 2020 dollars?

Accepted Answer

$$30,000 	imes \frac{180}{120} = 45,000$$

Question 14

Which of the following is NOT a function of the financial system?

Accepted Answer

Setting the minimum wage for workers.

Question 15

If the growth rate of an economy is $$2\%$$, approximately how many years will it take for the economy to double in size according to the Rule of 70?

Accepted Answer

$$\frac{70}{2} = 35$$ years

Question 16

During a recession, which of the following typically occurs?

Accepted Answer

GDP decreases, unemployment increases, and inflation decreases.

Question 17

Which of the following would be included in the calculation of GDP using the expenditure approach?

Accepted Answer

The purchase of a new car by a household.

Question 18

If actual inflation is higher than expected inflation, who is most likely to benefit?

Accepted Answer

Borrowers with fixed-rate loans.

Question 19

Which of the following is a bias in the Consumer Price Index (CPI)?

Accepted Answer

Substitution bias, because consumers may switch to cheaper goods when prices change.

Question 20

Suppose the expenditure on a fixed basket of goods in the base year is $$500$$ and in the current year is $$600. $$What is the CPI for the current year?

Accepted Answer

$$\frac{600}{500} 	imes 100 = 120$$

Macroeconomics Exam 1 Study Guide: GDP, Unemployment, Inflation, and Economic Growth

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