Q: The labor force participation rate (LFPR) is calculated as:

$$\text{LFPR} = \frac{\text{Labor Force}}{\text{Working Age Population}} \times 100$$

Question 1

Suppose a country produces only two goods: cars and computers. In 2020, it produced 100 cars at $$20,000 each and 200 computers at 1$$,000 each. In 2021, it produced 120 cars at $$22,000 each and 250 computers at 1$$,200 each. Using 2020 as the base year, what is the real GDP for 2021?

Accepted Answer

$$\4$$,400,000$

Question 2

Which of the following best describes the GDP deflator?

Accepted Answer

A measure of the average price level of all goods and services included in GDP.

Question 3

If nominal GDP increases by 5% and the GDP deflator increases by 3%, what is the approximate percentage change in real GDP?

Accepted Answer

$$2\%$$

Question 4

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

The value of used cars sold at a dealership.

Question 5

The labor force participation rate (LFPR) is calculated as:

Accepted Answer

$$	ext{LFPR} = \frac{	ext{Labor Force}}{	ext{Working Age Population}} 	imes 100$$

Question 6

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 7

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

$$5\%$$

Question 8

Suppose the nominal interest rate on a savings account is $$8\%$$ and the inflation rate is $$3\%. $$What is the real interest rate?

Accepted Answer

$$5\%$$

Question 9

If a country’s real GDP doubles in 14 years, what is the average annual growth rate according to the Rule of 70?

Accepted Answer

$$5\%$$

Question 10

Which of the following best explains why some countries remain poor despite access to modern technology?

Accepted Answer

Weak institutions and lack of secure property rights.

Question 11

Which of the following is a function of money?

Accepted Answer

Medium of exchange

Question 12

If the Federal Reserve wants to decrease the money supply, which of the following actions would it most likely take?

Accepted Answer

Sell government securities in open market operations.

Question 13

Which of the following best describes the aggregate demand curve?

Accepted Answer

It shows the relationship between the price level and the quantity of real GDP demanded by households, firms, and the government.

Question 14

During the 2007-2009 recession, which of the following was a key policy action taken by the Federal Reserve?

Accepted Answer

Lowering the federal funds rate to near zero.

Question 15

If the government increases its spending by $$100 million and the marginal propensity to consume (MPC) is 0.8$, what is the total increase in real GDP according to the simple spending multiplier?

Accepted Answer

$$500$$ million

Question 16

Which of the following is a limitation of using fiscal policy to stabilize the economy?

Accepted Answer

Time lags in recognizing and implementing policy changes.

Question 17

A country has a comparative advantage in producing a good if:

Accepted Answer

It can produce the good at a lower opportunity cost than other countries.

Question 18

Which of the following is a likely effect of a government-imposed tariff on imported steel?

Accepted Answer

Domestic steel producers benefit, but consumers pay higher prices.

Question 19

If the U.S. government runs a budget deficit for several years, which of the following is most likely to occur?

Accepted Answer

The federal government debt will increase.

Question 20

Which of the following best explains how banks create money in the economy?

Accepted Answer

By making loans from a portion of their deposits, thereby increasing the money supply.

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