Q: A country’s GDP deflator increased from 110 to 121 over one year. What is the inflation rate for that year?

$$ \frac{121 - 110}{110} \times 100 = 10\% $$

Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next-best alternative that must be given up to engage in an activity.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$ \frac{2}{1} $$ units of corn

Question 3

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

Accepted Answer

Purchases of intermediate goods

Question 4

A new scientific study finds that drinking Coke reduces life expectancy by 5 years. What is the likely effect on the demand curve for Coke?

Accepted Answer

The demand curve will shift to the left.

Question 5

If the price of a substitute good increases, what happens to the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 6

Which equation correctly represents GDP using the expenditure approach?

Accepted Answer

$$ GDP = C + I + G + NX $$

Question 7

A country’s GDP deflator increased from 110 to 121 over one year. What is the inflation rate for that year?

Accepted Answer

$$ \frac{121 - 110}{110} 	imes 100 = 10\% $$

Question 8

Which of the following is an example of a transfer payment?

Accepted Answer

Social Security payments to retirees

Question 9

If the price of input materials rises, what is the likely effect on the supply curve for a product?

Accepted Answer

The supply curve shifts to the left.

Question 10

Which of the following statements about the law of supply is correct?

Accepted Answer

As price increases, quantity supplied increases.

Question 11

Suppose the market price of a good rises from $$10 to 15$$, and as a result, the quantity supplied increases from 100 to 150 units. Which concept does this illustrate?

Accepted Answer

A movement along the supply curve

Question 12

Which of the following is an example of a normal good?

Accepted Answer

A good for which demand increases as income increases

Question 13

If a country specializes in producing only one good, what is the likely outcome according to the concept of comparative advantage?

Accepted Answer

The country will produce at a lower opportunity cost.

Question 14

Which of the following best describes a centrally planned economy?

Accepted Answer

An economy in which the government decides how economic resources will be allocated.

Question 15

If the marginal cost (MC) of providing an additional airline seat is $$20 and the marginal benefit (MB) to a standby passenger is 200$$, what should the airline do?

Accepted Answer

Sell the seat because MB \u003e MC.

Question 16

Which of the following is a positive statement?

Accepted Answer

"The unemployment rate is 5%."

Question 17

If the population of a country increases while GDP remains constant, what happens to GDP per capita?

Accepted Answer

GDP per capita decreases.

Question 18

Which formula is used to calculate the percentage change in GDP?

Accepted Answer

$$ \frac{GDP_{current} - GDP_{previous}}{GDP_{previous}} 	imes 100 $$

Question 19

Which of the following would cause a shift in the demand curve for a product?

Accepted Answer

A change in consumer tastes

Question 20

If the government increases spending on space exploration, which concept is most relevant in evaluating whether this is a good decision?

Accepted Answer

Opportunity cost

Fundamental Concepts in Macroeconomics: Scarcity, Markets, and GDP

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