Q: If nominal GDP in 2022 is $$20$$ trillion and the GDP deflator is $$125$$, what is real GDP for 2022?

$$Real\ GDP = \frac{Nominal\ GDP}{GDP\ Deflator} \times 100 = \frac{20}{125} \times 100 = 16$$ trillion

Q: A country has a population of 100 million, 60 million in the labor force, and 54 million employed. What is the unemployment rate?

$$Unemployment\ Rate = \frac{Unemployed}{Labor\ Force} \times 100 = \frac{6}{60} \times 100 = 10\%$$

Question 1

Which of the following best describes the Law of Demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases, ceteris paribus.

Question 2

Suppose the government introduces a subsidy for electric cars. Which of the following is the most likely immediate effect on the market for electric cars?

Accepted Answer

The supply curve shifts to the right, leading to a lower equilibrium price and higher equilibrium quantity.

Question 3

Which formula correctly calculates GDP using the Expenditure Approach?

Accepted Answer

$$GDP = C + I + G + (X - M)$$

Question 4

If nominal GDP in 2022 is $$20$$ trillion and the GDP deflator is $$125$$, what is real GDP for 2022?

Accepted Answer

$$Real\ GDP = \frac{Nominal\ GDP}{GDP\ Deflator} 	imes 100 = \frac{20}{125} 	imes 100 = 16$$ trillion

Question 5

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

Accepted Answer

Purchases of used goods

Question 6

A country has a population of 100 million, 60 million in the labor force, and 54 million employed. What is the unemployment rate?

Accepted Answer

$$Unemployment\ Rate = \frac{Unemployed}{Labor\ Force} 	imes 100 = \frac{6}{60} 	imes 100 = 10\%$$

Question 7

Which of the following best describes frictional unemployment?

Accepted Answer

Unemployment that occurs when people are between jobs or entering the labor force for the first time.

Question 8

If the Consumer Price Index (CPI) was 200 in 2020 and 210 in 2021, what was the inflation rate between these years?

Accepted Answer

$$Inflation\ Rate = \frac{CPI_{2021} - CPI_{2020}}{CPI_{2020}} 	imes 100 = \frac{210 - 200}{200} 	imes 100 = 5\%$$

Question 9

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 10

Which of the following would cause a leftward shift in the supply curve for wheat?

Accepted Answer

A drought that destroys a significant portion of the wheat crop.

Question 11

If the price level increases but nominal GDP remains constant, what happens to real GDP?

Accepted Answer

Real GDP decreases.

Question 12

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

Accepted Answer

GDP does not account for the distribution of income among residents of a country.

Question 13

Which of the following best describes core inflation?

Accepted Answer

Inflation rate that excludes food and energy prices.

Question 14

If the labor force participation rate increases while the unemployment rate remains unchanged, what must be true?

Accepted Answer

The number of people employed has increased.

Question 15

Which of the following is an example of cyclical unemployment?

Accepted Answer

A construction worker is laid off during a recession.

Question 16

If the price of oil rises sharply, which of the following is the most likely short-term effect on the Consumer Price Index (CPI)?

Accepted Answer

The CPI will increase due to higher transportation and production costs.

Question 17

Which of the following is true about the GDP deflator?

Accepted Answer

It measures the average price of all goods and services included in GDP.

Question 18

Which of the following would be counted in the calculation of U.S. GDP?

Accepted Answer

A new car produced in Michigan and sold to a Canadian buyer.

Question 19

If the government increases spending on infrastructure, which component of GDP is directly affected?

Accepted Answer

Government purchases ($$G)$$

Macroeconomics Exam 1 Study Guide: Markets, GDP, and Inflation

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