Q: Which formula correctly calculates the unemployment rate?

$$\text{Unemployment rate} = \frac{\text{Unemployed workers}}{\text{Labor force}} \times 100$$

Q: A country has a nominal GDP of $$2,000 billion and a real GDP of 1$$,800 billion. What is the GDP deflator?

$$\frac{2,000}{1,800} \times 100 = 111.11$$

Q: If the price level in year X is 120 and in year Y is 100, and the amount in year Y dollars is $500, what is the equivalent amount in year X dollars?

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

Question 1

Which of the following best explains why the aggregate demand (AD) curve is downward sloping?

Accepted Answer

Because higher prices reduce the purchasing power of money, increase interest rates, and make domestic goods less competitive internationally.

Question 2

Suppose the government increases its purchases by $100 billion. According to the AD-AS model, what is the most likely short-run effect on real GDP and the price level?

Accepted Answer

Real GDP increases and the price level rises.

Question 3

Which of the following would cause a rightward shift in the long-run aggregate supply (LRAS) curve?

Accepted Answer

A technological advancement that increases productivity.

Question 4

If the economy experiences a negative supply shock (such as a pandemic), what happens to the short-run aggregate supply (SRAS) curve?

Accepted Answer

SRAS shifts to the left.

Question 5

Which formula correctly calculates the unemployment rate?

Accepted Answer

$$	ext{Unemployment rate} = \frac{	ext{Unemployed workers}}{	ext{Labor force}} 	imes 100$$

Question 6

A country has a nominal GDP of $$2,000 billion and a real GDP of 1$$,800 billion. What is the GDP deflator?

Accepted Answer

$$\frac{2,000}{1,800} 	imes 100 = 111.11$$

Question 7

Which of the following is NOT a function of money?

Accepted Answer

Means of production

Question 8

If the money supply is $$500 billion and the monetary base is 100 $$billion, what is the money multiplier?

Accepted Answer

$$\frac{500}{100} = 5$$

Question 9

Which of the following best describes the main difference between commodity money and fiat money?

Accepted Answer

Commodity money has intrinsic value, while fiat money does not.

Question 10

A bank has $1,000,000 in deposits and is required to keep 10% as reserves. If it lends out the rest, what is the maximum amount it can lend?

Accepted Answer

$$1,000,000 - 100$$,000 = $$900,000$$

Question 11

Which of the following is included in M2 but NOT in M1?

Accepted Answer

Small-denomination time deposits

Question 12

According to the quantity theory of money, if the money supply grows by 8% and real output grows by 3%, what is the predicted inflation rate?

Accepted Answer

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

Question 13

Which of the following is a goal of monetary policy as outlined in Chapter 15?

Accepted Answer

Price stability

Question 14

If the inflation rate is 4% and the nominal interest rate is 7%, what is the real interest rate?

Accepted Answer

$$7\% - 4\% = 3\%$$

Question 15

Which of the following would NOT shift the aggregate demand curve?

Accepted Answer

A change in the labor force

Question 16

Which macroeconomic school of thought emphasizes the importance of monetary policy and the control of the money supply?

Accepted Answer

Monetarist model

Question 17

If the price level in year X is 120 and in year Y is 100, and the amount in year Y dollars is $500, what is the equivalent amount in year X dollars?

Accepted Answer

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

Question 18

Which of the following is a plausible consequence of hyperinflation caused by a government monetizing its debt?

Accepted Answer

Rapid decrease in the value of money and loss of confidence in the currency

Question 19

A country’s real GDP increases from $$1,000 billion to 1$$,100 billion in one year. What is the economic growth rate?

Accepted Answer

$$\frac{1,100 - 1,000}{1,000} 	imes 100 = 10\%$$

Question 20

If the labor force is 50 million and the working-age population is 100 million, what is the labor force participation rate?

Accepted Answer

$$\frac{50}{100} 	imes 100 = 50\%$$

Macroeconomics Exam 2 Study Guide: Aggregate Demand & Supply, Money, and Monetary Policy

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