Q: If nominal GDP in 2025 is $$\22$$,000$$ billion and real GDP in 2025 (using 2020 as the base year) is $$\$$20,000$$ billion, what is the GDP deflator for 2025?

$$\displaystyle \frac{22,000}{20,000} \times 100 = 110$$

Q: A country has a working-age population of 200 million, 130 million employed, and 10 million unemployed. What is the unemployment rate?

$$\displaystyle \frac{10}{140} \times 100 = 7.14\%$$

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

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

Question 1

Suppose Country A can produce a maximum of 100 units of wheat or 50 units of cloth with its available resources. What is the opportunity cost of producing one unit of cloth in terms of wheat for Country A?

Accepted Answer

$$2$$

Question 2

If the price of a normal good increases, which of the following will occur, holding all else constant?

Accepted Answer

Quantity demanded will decrease due to the law of demand.

Question 3

A government sets a price ceiling below the equilibrium price for gasoline. What is the most likely outcome in the gasoline market?

Accepted Answer

A shortage, as quantity demanded exceeds quantity supplied.

Question 4

Which of the following best describes the effect of a per-unit tax imposed on sellers in a competitive market?

Accepted Answer

The supply curve shifts vertically upward by the amount of the tax.

Question 5

If nominal GDP in 2025 is $$\22$$,000$$ billion and real GDP in 2025 (using 2020 as the base year) is $$\$$20,000$$ billion, what is the GDP deflator for 2025?

Accepted Answer

$$\displaystyle \frac{22,000}{20,000} 	imes 100 = 110$$

Question 6

A country has a working-age population of 200 million, 130 million employed, and 10 million unemployed. What is the unemployment rate?

Accepted Answer

$$\displaystyle \frac{10}{140} 	imes 100 = 7.14\%$$

Question 7

If the required reserve ratio is $$10\%$$, what is the simple deposit multiplier?

Accepted Answer

$$\displaystyle \frac{1}{0.10} = 10$$

Question 8

Suppose the money supply grows by $$8\%$$ and real GDP grows by $$3\%. $$According to the quantity theory of money (assuming velocity is constant), what is the inflation rate?

Accepted Answer

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

Question 9

Which of the following would cause the short-run aggregate supply (SRAS) curve to shift to the left?

Accepted Answer

An increase in the price of oil due to a supply shock.

Question 10

If the Federal Reserve wants to pursue expansionary monetary policy, which of the following actions is it most likely to take?

Accepted Answer

Buy U.S. Treasury securities in the open market.

Question 11

Suppose the government increases its purchases by $$\100$ million and the government purchases multiplier is 2$. What is the total change in equilibrium real GDP?

Accepted Answer

$$\200$ million

Question 12

Which of the following best explains why the party with the steeper demand or supply curve bears more of the tax burden?

Accepted Answer

The steeper curve is less elastic, so that side cannot avoid the tax by changing quantity much.

Question 13

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

Accepted Answer

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

Question 14

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

Accepted Answer

The value of used cars sold at a dealership.

Question 15

A country is experiencing both high inflation and high unemployment due to a negative supply shock. What is this situation called?

Accepted Answer

Stagflation

Question 16

If the labor force participation rate is $$70\%$$ and the working-age population is $$150$$ million, what is the size of the labor force?

Accepted Answer

$$0.70 	imes 150 = 105$$ million

Question 17

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

Accepted Answer

Unemployment insurance payments that increase during a recession.

Question 18

If the real interest rate is $$3\%$$ and the inflation rate is $$2\%$$, what is the nominal interest rate?

Accepted Answer

$$3\% + 2\% = 5\%$$

Question 19

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

Accepted Answer

A decrease in interest rates due to expansionary monetary policy.

Question 20

Suppose the government increases taxes by $$\50$ million and the tax multiplier is -1.5$. What is the total change in equilibrium real GDP?

Accepted Answer

$$-1.5 	imes 50 = -\75$ million

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