Q: If the labor force in a country is 200 million and 180 million people are employed, what is the U-3 unemployment rate?

$$\frac{20}{200} \times 100 = 10\%$$

Q: If the labor force participation rate is $$60\%$$ and the working-age population is $$250$$ million, what is the size of the labor force?

$$0.60 \times 250 = 150$$ million

Q: Suppose the price level increases from $$120 to$$ $$126$$ over one year. What is the inflation rate for that year?

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

Question 1

Suppose the nominal GDP of a country in 2025 is $$\1$$,200$$ billion and the GDP deflator is 120$. What is the real GDP for 2025?

Accepted Answer

$$\1$$,000$ billion

Question 2

Which of the following best describes the difference between GDP and GNP?

Accepted Answer

GDP measures the value of all goods and services produced within a country's borders, while GNP measures the value of all goods and services produced by a country's citizens regardless of location.

Question 3

If the labor force in a country is 200 million and 180 million people are employed, what is the U-3 unemployment rate?

Accepted Answer

$$\frac{20}{200} 	imes 100 = 10\%$$

Question 4

Which of the following is an example of a leakage in the circular flow model?

Accepted Answer

Households saving part of their income in banks

Question 5

A country’s nominal GDP grew from $$\500$ billion to $$\$$550$$ billion in one year. The GDP deflator increased from $$100 to$$ $$110. $$What is the real GDP growth rate?

Accepted Answer

$$\frac{(\frac{550}{110}) - (\frac{500}{100})}{\frac{500}{100}} 	imes 100 = 0\%$$

Question 6

Which of the following would NOT be included in the calculation of a country’s GDP using the expenditure approach?

Accepted Answer

The purchase of used cars by households

Question 7

If the labor force participation rate is $$60\%$$ and the working-age population is $$250$$ million, what is the size of the labor force?

Accepted Answer

$$0.60 	imes 250 = 150$$ million

Question 8

Which of the following best illustrates Adam Smith’s theory of the 'Invisible Hand'?

Accepted Answer

Individuals pursuing their own self-interest unintentionally benefit society as a whole.

Question 9

Suppose the price level increases from $$120 to$$ $$126$$ over one year. What is the inflation rate for that year?

Accepted Answer

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

Question 10

Which of the following is a factor that would cause a shift in the demand curve for new cars?

Accepted Answer

A decrease in consumers’ income

Question 11

If actual investment is less than planned investment in the economy, what is likely happening to inventories?

Accepted Answer

Inventories are falling

Question 12

Which of the following best describes a secular trend in labor market data?

Accepted Answer

A long-term increase in labor force participation over several decades

Question 13

A country’s real GDP in 2024 is $$\800$ billion and in 2025 is $$\$$840$$ billion. What is the real GDP growth rate from 2024 to 2025?

Accepted Answer

$$\frac{840 - 800}{800} 	imes 100 = 5\%$$

Question 14

Which of the following is an injection in the circular flow model?

Accepted Answer

Government spending on public goods

Question 15

If the unemployment rate (U-3) is $$6\%$$, the labor force is $$100$$ million, and the number of unemployed is $$6$$ million, what is the number of employed people?

Accepted Answer

$$100 - 6 = 94$$ million

Question 16

Which of the following would increase the supply of wheat in the market?

Accepted Answer

A technological improvement in wheat farming

Question 17

Suppose the nominal GDP in 2023 is $$\1$$,000$$ billion and the real GDP is $$\$$800$$ billion. What is the value of the GDP deflator?

Accepted Answer

$$\frac{1,000}{800} 	imes 100 = 125$$

Question 18

Which of the following is most likely to be counted in the calculation of GNP but not GDP for the United States?

Accepted Answer

Profits earned by a U.S. company operating in Germany

Question 19

If the labor force is $$120$$ million, the number of unemployed is $$12$$ million, and the number of marginally attached workers is $$3$$ million, what is the U-5 unemployment rate?

Accepted Answer

$$\frac{12 + 3}{120 + 3} 	imes 100 = 12.8\%$$

Question 20

Which of the following best describes the key identity in the circular flow model?

Accepted Answer

Total income equals total expenditure in the economy

Macroeconomics Exam 1 Study Guide: Growth Models, GDP, Labor Markets, and Core Concepts

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