Q: Suppose the GDP deflator in 2022 is 120 and nominal GDP is \$600 billion. What is the real GDP for 2022?

$$\text{Real GDP} = \frac{\600$$\text{ billion}}{1.2} = \$$500\text{ billion}$$

Q: If the unemployment rate is 6%, the labor force is 200 million, and the number of employed people is 188 million, how many people are unemployed?

$$\text{Unemployed} = 200\text{ million} \times 0.06 = 12\text{ million}$$

Q: If the CPI in 2021 is 250 and the CPI in 2022 is 260, what is the inflation rate between these years?

$$\text{Inflation Rate} = \frac{260 - 250}{250} \times 100 = 4\%$$

Q: If the nominal interest rate is 8% and the inflation rate is 3%, what is the real interest rate?

$$\text{Real Interest Rate} = 8\% - 3\% = 5\%$$

Q: Suppose a country’s real GDP per capita increases from \$$40,000 to \44$$,000 in one year. What is the growth rate?

$$\text{Growth Rate} = \frac{44,000 - 40,000}{40,000} \times 100 = 10\%$$

Question 1

Which of the following best describes the difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP is measured using current prices, while real GDP is adjusted for inflation using a base year's prices.

Question 2

Suppose the GDP deflator in 2022 is 120 and nominal GDP is \$600 billion. What is the real GDP for 2022?

Accepted Answer

$$	ext{Real GDP} = \frac{\600$$	ext{ billion}}{1.2} = \$$500	ext{ billion}$$

Question 3

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

Accepted Answer

Transfer payments such as Social Security

Question 4

If the unemployment rate is 6%, the labor force is 200 million, and the number of employed people is 188 million, how many people are unemployed?

Accepted Answer

$$	ext{Unemployed} = 200	ext{ million} 	imes 0.06 = 12	ext{ million}$$

Question 5

Which of the following best describes frictional unemployment?

Accepted Answer

Unemployment that occurs when people are between jobs or entering the labor force

Question 6

If the CPI in 2021 is 250 and the CPI in 2022 is 260, what is the inflation rate between these years?

Accepted Answer

$$	ext{Inflation Rate} = \frac{260 - 250}{250} 	imes 100 = 4\%$$

Question 7

Which of the following is an example of structural unemployment?

Accepted Answer

A coal miner loses their job because the economy shifts to renewable energy.

Question 8

If the nominal interest rate is 8% and the inflation rate is 3%, what is the real interest rate?

Accepted Answer

$$	ext{Real Interest Rate} = 8\% - 3\% = 5\%$$

Question 9

Which of the following would increase the labor force participation rate?

Accepted Answer

An increase in the number of people actively seeking work

Question 10

Suppose a country’s real GDP per capita increases from \$$40,000 to \44$$,000 in one year. What is the growth rate?

Accepted Answer

$$	ext{Growth Rate} = \frac{44,000 - 40,000}{40,000} 	imes 100 = 10\%$$

Question 11

Which of the following is a cost of inflation?

Accepted Answer

Menu costs, such as the expense of changing prices in restaurants

Question 12

If the efficiency wage theory is correct, what is a likely consequence for unemployment?

Accepted Answer

Unemployment will increase because higher wages attract more job seekers than there are jobs.

Question 13

Which of the following best explains the crowding out effect in the loanable funds market?

Accepted Answer

Government borrowing increases interest rates, reducing private investment.

Question 14

A country has a population of 50 million, a labor force of 30 million, and 27 million employed. What is the unemployment rate?

Accepted Answer

$$	ext{Unemployment Rate} = \frac{30 - 27}{30} 	imes 100 = 10\%$$

Question 15

Which of the following is most likely to increase long-run economic growth?

Accepted Answer

Investing in human capital and technology

Question 16

If the price level rises from 120 to 132, what is the percentage increase in the price level?

Accepted Answer

$$\frac{132 - 120}{120} 	imes 100 = 10\%$$

Question 17

Which of the following is a problem with using the unemployment rate as a measure of labor market health?

Accepted Answer

It does not account for underemployed workers.

Question 18

Which of the following would be considered an intermediate good in GDP accounting?

Accepted Answer

A tire sold to a car manufacturer for use in new cars

Question 19

If the natural rate of unemployment is 4% and the actual unemployment rate is 7%, what is the cyclical unemployment rate?

Accepted Answer

$$	ext{Cyclical Unemployment} = 7\% - 4\% = 3\%$$

Macroeconomics Core Concepts: GDP, Unemployment, Inflation, and Economic Growth

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