Q: Suppose in a given year, the total value of all final goods and services produced in a country (measured at current prices) is $$5 trillion, and the value measured at base year prices is 4.5 $$trillion. What is the GDP deflator for that year?

$$\frac{5}{4.5} \times 100 = 111.1$$

Q: If the nominal GDP in 2022 is $$20 trillion and the real GDP (in 2015 dollars) is 18 $$trillion, what is the price index (GDP deflator) for 2022?

$$\frac{20}{18} \times 100 = 111.1$$

Q: If the labor force in a country is 150 million and 10 million people are unemployed, what is the U3 unemployment rate?

$$\frac{10}{150} \times 100 = 6.67\%$$

Q: If the Consumer Price Index (CPI) was 120 last year and is 126 this year, what is the inflation rate?

$$\frac{126 - 120}{120} \times 100 = 5\%$$

Q: A country has a population of 200 million, of which 120 million are in the labor force. What is the labor force participation rate?

$$\frac{120}{200} \times 100 = 60\%$$

Question 1

Suppose in a given year, the total value of all final goods and services produced in a country (measured at current prices) is $$5 trillion, and the value measured at base year prices is 4.5 $$trillion. What is the GDP deflator for that year?

Accepted Answer

$$\frac{5}{4.5} 	imes 100 = 111.1$$

Question 2

If the nominal GDP in 2022 is $$20 trillion and the real GDP (in 2015 dollars) is 18 $$trillion, what is the price index (GDP deflator) for 2022?

Accepted Answer

$$\frac{20}{18} 	imes 100 = 111.1$$

Question 3

A country’s real GDP grew from $$1,000 billion to 2$$,000 billion in 20 years. Using the Rule of 70, what was the approximate average annual growth rate?

Accepted Answer

$$\frac{70}{20} = 3.5\%$$

Question 4

If the labor force in a country is 150 million and 10 million people are unemployed, what is the U3 unemployment rate?

Accepted Answer

$$\frac{10}{150} 	imes 100 = 6.67\%$$

Question 5

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

Accepted Answer

Purchases of used cars by consumers

Question 6

If the Consumer Price Index (CPI) was 120 last year and is 126 this year, what is the inflation rate?

Accepted Answer

$$\frac{126 - 120}{120} 	imes 100 = 5\%$$

Question 7

A country has a population of 200 million, of which 120 million are in the labor force. What is the labor force participation rate?

Accepted Answer

$$\frac{120}{200} 	imes 100 = 60\%$$

Question 8

If nominal wages increased by 4% and the CPI increased by 6%, what happened to real wages?

Accepted Answer

Real wages decreased by approximately 2%

Question 9

Which of the following best describes the circular flow model in a market economy?

Accepted Answer

It shows the continuous movement of money, goods, and services between households and firms.

Question 10

During a recession, which of the following typically occurs?

Accepted Answer

Real GDP falls and unemployment rises.

Question 11

If a country’s real GDP per capita increases, which of the following is most likely true?

Accepted Answer

The average standard of living has improved.

Question 12

Suppose the production function is $$Y = A K$$^{0.5}$$ L$$^{0.5}$$. If technology (A$) increases, what happens to output (Y$) for given levels of capital (K$) and labor (L$)?

Accepted Answer

Output ($$Y) $$increases.

Question 13

If the equilibrium wage in the labor market increases due to higher demand for labor, what happens to the quantity of labor supplied and demanded?

Accepted Answer

Quantity of labor supplied increases, quantity demanded decreases.

Question 14

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job.

Question 15

If the natural rate of unemployment is 5% and the actual unemployment rate is 8%, what can be inferred about the economy?

Accepted Answer

The economy is experiencing cyclical unemployment.

Question 16

Given the Solow production function $$Y = A K$$^{\alpha}$$ L$$^{1-\alpha}$$, which of the following will NOT increase output (Y$)?

Accepted Answer

A decrease in capital ($$K)$$

Question 17

If nominal GDP grew by 8% and the GDP deflator increased by 5%, what is the approximate real GDP growth rate?

Accepted Answer

3%

Question 18

A country’s GDP per capita is $50,000 and its population grows by 2% per year while real GDP grows by 4% per year. What is the approximate annual growth rate of GDP per capita?

Accepted Answer

2%

Question 19

If the labor force is 100 million, 6 million are unemployed, and 2 million are marginally attached workers, what is the U6 unemployment rate?

Accepted Answer

$$\frac{6 + 2}{100} 	imes 100 = 8\%$$

Question 20

If the price index in 2020 is 150 and in 2021 is 165, what is the inflation rate from 2020 to 2021?

Accepted Answer

$$\frac{165 - 150}{150} 	imes 100 = 10\%$$

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