Q: Suppose the nominal GDP in 2022 was $$5,000 billion and the real GDP (using 2015 as the base year) was 4$$,500 billion. What is the GDP deflator for 2022?

GDP Deflator = $$\frac{\text{Nominal GDP}}{\text{Real GDP}} \times 100 = \frac{5000}{4500} \times 100 = 111.1$$

Q: If the Consumer Price Index (CPI) was 220 in 2021 and 242 in 2022, what was the inflation rate between these years?

Inflation Rate = $$\frac{242 - 220}{220} \times 100 = 10\%$$

Q: If the labor force is 150 million and the number of employed people is 140 million, what is the unemployment rate?

Unemployment Rate = $$\frac{150 - 140}{150} \times 100 = 6.67\%$$

Q: If a country’s real GDP grows from $$1,000 billion to 1$$,080 billion in one year, what is the growth rate?

Growth Rate = $$\frac{1080 - 1000}{1000} \times 100 = 8\%$$

Question 1

Which of the following is NOT included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

The value of used cars sold at a dealership

Question 2

Suppose the nominal GDP in 2022 was $$5,000 billion and the real GDP (using 2015 as the base year) was 4$$,500 billion. What is the GDP deflator for 2022?

Accepted Answer

GDP Deflator = $$\frac{	ext{Nominal GDP}}{	ext{Real GDP}} 	imes 100 = \frac{5000}{4500} 	imes 100 = 111.1$$

Question 3

Which of the following best describes a shortcoming of GDP as a measure of economic well-being?

Accepted Answer

GDP does not account for environmental degradation caused by production.

Question 4

If the Consumer Price Index (CPI) was 220 in 2021 and 242 in 2022, what was the inflation rate between these years?

Accepted Answer

Inflation Rate = $$\frac{242 - 220}{220} 	imes 100 = 10\%$$

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

A discouraged worker is best described as:

Accepted Answer

Someone who has stopped looking for work because they believe no jobs are available for them.

Question 7

If the labor force is 150 million and the number of employed people is 140 million, what is the unemployment rate?

Accepted Answer

Unemployment Rate = $$\frac{150 - 140}{150} 	imes 100 = 6.67\%$$

Question 8

Which of the following statements about the Consumer Price Index (CPI) is TRUE?

Accepted Answer

CPI may overstate inflation because it does not fully account for consumers substituting cheaper goods.

Question 9

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

Accepted Answer

Real Interest Rate = $$8\% - 3\% = 5\%$$

Question 10

Which of the following is a determinant of long-run economic growth?

Accepted Answer

Technological progress

Question 11

If a country’s real GDP grows from $$1,000 billion to 1$$,080 billion in one year, what is the growth rate?

Accepted Answer

Growth Rate = $$\frac{1080 - 1000}{1000} 	imes 100 = 8\%$$

Question 12

According to the Rule of 70, if a country’s annual growth rate is 2%, how many years will it take for its real GDP to double?

Accepted Answer

Years to double = $$\frac{70}{2} = 35$$

Question 13

Which of the following best describes the difference between financial markets and financial intermediaries?

Accepted Answer

Financial markets allow direct borrowing and lending, while financial intermediaries facilitate indirect finance.

Question 14

If the government increases its borrowing, what is the likely effect on the market for loanable funds?

Accepted Answer

The demand for loanable funds increases, leading to higher interest rates and crowding out private investment.

Question 15

Which of the following is an example of indirect finance?

Accepted Answer

Depositing money in a bank, which then lends it to a business

Question 16

If the labor force participation rate is 60% and the working-age population is 200 million, what is the size of the labor force?

Accepted Answer

Labor Force = $$0.60 	imes 200\,	ext{million} = 120\,	ext{million}$$

Question 17

Which of the following would cause a movement along the supply curve in the market for loanable funds?

Accepted Answer

A change in the real interest rate

Question 18

If actual GDP is below potential GDP, which of the following is most likely occurring?

Accepted Answer

The economy is experiencing cyclical unemployment.

Question 19

Which of the following best illustrates the Savings and Investment Identity in a closed economy?

Accepted Answer

Total savings equals total investment: $$S = I$$

Macroeconomics Exam 2 Review: GDP, Unemployment, and Economic Growth

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