Q: The Consumer Price Index (CPI) is calculated using which of the following formulas?

$$\text{CPI} = \frac{\text{Cost of basket in current year}}{\text{Cost of basket in base year}} \times 100$$

Question 1

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

Accepted Answer

$$2$$ units of corn

Question 2

Which of the following best describes the concept of comparative advantage?

Accepted Answer

Producing a good at a lower opportunity cost than another country

Question 3

If the price of a good increases, what is the most likely effect on the quantity supplied, according to the law of supply?

Accepted Answer

Quantity supplied will increase

Question 4

Which of the following is NOT included in the calculation of GDP using the expenditure approach?

Accepted Answer

Intermediate goods

Question 5

The Consumer Price Index (CPI) is calculated using which of the following formulas?

Accepted Answer

$$	ext{CPI} = \frac{	ext{Cost of basket in current year}}{	ext{Cost of basket in base year}} 	imes 100$$

Question 6

If nominal GDP increases by 5% and the GDP deflator increases by 2%, what is the approximate rate of real GDP growth?

Accepted Answer

$$3\%$$

Question 7

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

Accepted Answer

An increase in government spending

Question 8

Suppose the unemployment rate is 6% and the natural rate of unemployment is 4%. What is the cyclical unemployment rate?

Accepted Answer

$$2\%$$

Question 9

If the money supply increases by 10% and velocity remains constant, according to the quantity theory of money, what is the expected change in nominal GDP?

Accepted Answer

Nominal GDP will increase by 10%

Question 10

Which of the following best explains why inflation can redistribute wealth between borrowers and lenders?

Accepted Answer

Inflation decreases the real value of money repaid by borrowers

Question 11

A country has a trade deficit. Which of the following must be true?

Accepted Answer

Imports are greater than exports

Question 12

If the real interest rate in Country A is higher than in Country B, what is the likely effect on international capital flows?

Accepted Answer

Capital will flow from Country B to Country A

Question 13

Which of the following is a function of money?

Accepted Answer

A medium of exchange

Question 14

If the reserve ratio is 10%, what is the simple money multiplier?

Accepted Answer

$$10$$

Question 15

Which of the following would NOT be considered frictional unemployment?

Accepted Answer

A worker laid off due to a recession

Question 16

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

Accepted Answer

$$5\%$$

Question 17

Which of the following policies would most likely increase long-run economic growth?

Accepted Answer

Increasing government spending on infrastructure

Question 18

If the central bank wants to decrease the money supply, which of the following actions should it take?

Accepted Answer

Sell government bonds

Question 19

Suppose the exchange rate between the US dollar and the euro changes from $$1 = 0.9$$ euro to $$1 = 1.1$$ euro. What has happened to the value of the dollar?

Accepted Answer

The dollar has appreciated

Question 20

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

Accepted Answer

Real GDP is adjusted for inflation, nominal GDP is not

Comprehensive Study Guide: Core Topics in Macroeconomics

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