Q: Suppose the nominal GDP of a country in 2022 is $$20,000$$ and the real GDP is $$18,000. $$What is the GDP deflator for 2022?

$$\frac{20,000}{18,000} \times 100 = 111.1$$

Q: A country has the following data: Employed workers = 150 million, Unemployed workers = 10 million, Working-age population = 200 million. What is the unemployment rate?

$$\frac{10}{150+10} \times 100 = 6.25\%$$

Q: If the Consumer Price Index (CPI) was $$120 in 2021 $$and $$126 in 2022$$, what was the inflation rate between 2021 and 2022?

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

Q: A country produces only two goods: cars and computers. In 2021, it produced 100 cars at $$\20$$,000$$ each and 200 computers at $$\$$1,000$$ each. In 2022, it produced 120 cars at $$\22$$,000$$ each and 250 computers at $$\$$1,200$$ each. Using 2021 as the base year, what is the real GDP in 2022?

$$120 \times 20,000 + 250 \times 1,000 = 2,650,000$$

Question 1

Suppose the nominal GDP of a country in 2022 is $$20,000$$ and the real GDP is $$18,000. $$What is the GDP deflator for 2022?

Accepted Answer

$$\frac{20,000}{18,000} 	imes 100 = 111.1$$

Question 2

Which of the following best explains why the long-run aggregate supply (LRAS) curve is vertical?

Accepted Answer

Because in the long run, output is determined by the economy's resources and technology, not by the price level.

Question 3

A country has the following data: Employed workers = 150 million, Unemployed workers = 10 million, Working-age population = 200 million. What is the unemployment rate?

Accepted Answer

$$\frac{10}{150+10} 	imes 100 = 6.25\%$$

Question 4

If the Consumer Price Index (CPI) was $$120 in 2021 $$and $$126 in 2022$$, what was the inflation rate between 2021 and 2022?

Accepted Answer

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

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

If the growth rate of real GDP is $$2\%$$ per year, approximately how many years will it take for the economy to double in size according to the Rule of 70?

Accepted Answer

$$\frac{70}{2} = 35$$ years

Question 7

Which of the following would shift the aggregate demand (AD) curve to the right?

Accepted Answer

An increase in government purchases

Question 8

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

Accepted Answer

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

Question 9

Which of the following is NOT a function of money?

Accepted Answer

A source of economic growth

Question 10

If the government increases its spending without increasing taxes, what is the most likely short-run effect on the market for loanable funds?

Accepted Answer

The demand for loanable funds increases, raising the real interest rate and potentially crowding out private investment.

Question 11

A country produces only two goods: cars and computers. In 2021, it produced 100 cars at $$\20$$,000$$ each and 200 computers at $$\$$1,000$$ each. In 2022, it produced 120 cars at $$\22$$,000$$ each and 250 computers at $$\$$1,200$$ each. Using 2021 as the base year, what is the real GDP in 2022?

Accepted Answer

$$120 	imes 20,000 + 250 	imes 1,000 = 2,650,000$$

Question 12

Which of the following best describes the crowding-out effect?

Accepted Answer

Government borrowing increases interest rates, reducing private investment.

Question 13

If the money supply is $$\1$$,000$$ and the monetary base is $$\$$200$$, what is the money multiplier?

Accepted Answer

$$\frac{1,000}{200} = 5$$

Question 14

Which of the following is a bias in the Consumer Price Index (CPI)?

Accepted Answer

Substitution bias, because consumers may switch to cheaper goods when prices change.

Question 15

Which of the following policies would the Federal Reserve use to conduct expansionary monetary policy?

Accepted Answer

Lowering the interest rate on reserve balances (IORB)

Question 16

Country A can produce 10 tons of wheat or 5 tons of steel with the same resources. Country B can produce 8 tons of wheat or 4 tons of steel. Which country has the comparative advantage in steel?

Accepted Answer

Country A, because it has a lower opportunity cost for producing steel.

Question 17

Which of the following is an example of an automatic stabilizer?

Accepted Answer

Unemployment compensation

Question 18

If the price level in 2010 was $$150$$ and in 2020 it was $$180$$, and a worker earned $$\50$$,000$ in 2010, what is the equivalent amount in 2020 dollars?

Accepted Answer

$$50,000 	imes \frac{180}{150} = 60,000$$

Question 19

Which of the following is a reason why quotas are generally considered worse than tariffs?

Accepted Answer

Quotas do not generate government revenue, while tariffs do.

Question 20

If the growth rate of the money supply is $$6\%$$ and the growth rate of real output is $$2\%$$, what does the quantity theory of money predict for the inflation rate?

Accepted Answer

$$6\% - 2\% = 4\%$$

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