Q: Suppose the nominal GDP in 2022 is $$ \22$$\text{ trillion} $$ and the real GDP in 2022 (using 2015 as the base year) is $$ \$$20\text{ trillion} . $$What is the GDP deflator for 2022?

$$ \frac{22}{20} \times 100 = 110 $$

Q: If the Consumer Price Index (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 has 150 million employed workers, 10 million unemployed workers, and a working-age population of 200 million. What is the unemployment rate?

$$ \frac{10}{160} \times 100 = 6.25\% $$

Q: Suppose the real GDP of a country was $$ \1$$,000 $$ billion in 2010 and $$ \$$1,200 $$ billion in 2020. What was the average annual growth rate over this period? (Use the formula: $$ \text{Growth rate} = \frac{\text{Real GDP}_{2} - \text{Real GDP}_{1}}{\text{Real GDP}_{1}} \times 100 )$$

$$ \frac{1,200 - 1,000}{1,000} \times 100 = 20\% $$

Q: If the labor force participation rate is 80\% and the working-age population is 250 million, what is the size of the labor force?

$$ 250 \times 0.8 = 200 $$ million

Q: A country’s CPI was 150 in 2015 and 180 in 2020. If a worker earned $$ \30$$,000 $ in 2015, what is the equivalent amount in 2020 dollars?

$$ 30,000 \times \frac{180}{150} = 36,000 $$

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 $$ \22$$	ext{ trillion} $$ and the real GDP in 2022 (using 2015 as the base year) is $$ \$$20	ext{ trillion} . $$What is the GDP deflator for 2022?

Accepted Answer

$$ \frac{22}{20} 	imes 100 = 110 $$

Question 3

If the Consumer Price Index (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 4

A country has 150 million employed workers, 10 million unemployed workers, and a working-age population of 200 million. What is the unemployment rate?

Accepted Answer

$$ \frac{10}{160} 	imes 100 = 6.25\% $$

Question 5

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 6

If the nominal interest rate is 8\% and the inflation rate is 3\%, what is the real interest rate?

Accepted Answer

$$ 8\% - 3\% = 5\% $$

Question 7

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

Accepted Answer

A used house sold from one person to another.

Question 8

Suppose the real GDP of a country was $$ \1$$,000 $$ billion in 2010 and $$ \$$1,200 $$ billion in 2020. What was the average annual growth rate over this period? (Use the formula: $$ 	ext{Growth rate} = \frac{	ext{Real GDP}_{2} - 	ext{Real GDP}_{1}}{	ext{Real GDP}_{1}} 	imes 100 )$$

Accepted Answer

$$ \frac{1,200 - 1,000}{1,000} 	imes 100 = 20\% $$

Question 9

If the labor force participation rate is 80\% and the working-age population is 250 million, what is the size of the labor force?

Accepted Answer

$$ 250 	imes 0.8 = 200 $$ million

Question 10

Which of the following best describes the 'natural rate of unemployment'?

Accepted Answer

The unemployment rate when cyclical unemployment is zero.

Question 11

A country’s CPI was 150 in 2015 and 180 in 2020. If a worker earned $$ \30$$,000 $ in 2015, what is the equivalent amount in 2020 dollars?

Accepted Answer

$$ 30,000 	imes \frac{180}{150} = 36,000 $$

Question 12

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.

Question 13

If the government increases its budget deficit, what is the likely effect in the market for loanable funds?

Accepted Answer

The supply of loanable funds decreases, raising the real interest rate and potentially crowding out private investment.

Question 14

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 15

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

Accepted Answer

Borrowers with fixed-rate loans.

Question 16

Suppose the price level in 2010 is 120 and in 2020 is 180. If a nominal variable was $$ \60$$,000 $ in 2020, what is its real value in 2010 dollars?

Accepted Answer

$$ 60,000 	imes \frac{120}{180} = 40,000 $$

Question 17

Which of the following is NOT a determinant of labor productivity?

Accepted Answer

The number of hours worked per week.

Question 18

If the growth rate of real GDP is 2\% per year, approximately how many years will it take for real GDP to double? (Use the Rule of 70.)

Accepted Answer

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

Question 19

During a recession, which of the following typically occurs?

Accepted Answer

GDP decreases, unemployment increases, and inflation decreases.

Question 20

Which of the following best describes the function of financial intermediaries in the economy?

Accepted Answer

They channel funds from savers to borrowers, providing risk sharing, liquidity, and information.

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

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