Q: If nominal GDP in 2024 is $$29.2T and real GDP in 2024 is 23.3T$$, what is the GDP deflator for 2024?

$$GDP\ Deflator = \frac{Nominal\ GDP}{Real\ GDP} \times 100 = \frac{29.2}{23.3} \times 100 = 125$$

Q: If the CPI in 2020 was 250 and in 2021 it was 260, what was the inflation rate between 2020 and 2021?

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

Question 1

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies the behavior of individual markets, while macroeconomics studies the economy as a whole.

Question 2

Which of the following transactions would be included in the calculation of a country's GDP for 2024?

Accepted Answer

A new car produced in 2024 in the country and sold to a domestic consumer.

Question 3

Given the following data for a country in 2024: Consumption = $$10T, Investment = 3T$$, Government Purchases = $$4T, Net Exports = -1T. $$What is the GDP?

Accepted Answer

$16T

Question 4

If nominal GDP in 2024 is $$29.2T and real GDP in 2024 is 23.3T$$, what is the GDP deflator for 2024?

Accepted Answer

$$GDP\ Deflator = \frac{Nominal\ GDP}{Real\ GDP} 	imes 100 = \frac{29.2}{23.3} 	imes 100 = 125$$

Question 5

If the CPI in 2020 was 250 and in 2021 it was 260, what was the inflation rate between 2020 and 2021?

Accepted Answer

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

Question 6

Which of the following is a cost of inflation that directly affects businesses?

Accepted Answer

Menu costs

Question 7

Suppose the nominal interest rate on a savings account is 6% and the inflation rate is 4%. What is the real interest rate?

Accepted Answer

$$r = i - \pi = 6\% - 4\% = 2\%$$

Question 8

Which of the following best explains why the long-run aggregate supply (LRAS) curve is vertical?

Accepted Answer

In the long run, output is determined by the economy’s resources and technology, not by the price level.

Question 9

If a country’s real GDP grows by 3% per year, approximately how many years will it take for real GDP to double according to the Rule of 70?

Accepted Answer

$$Years\ to\ double = \frac{70}{3} \approx 23.3$$

Question 10

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

Accepted Answer

An unexpected increase in the price of oil

Question 11

According to the Phillips Curve, what is the relationship between inflation and unemployment in the short run?

Accepted Answer

There is a trade-off: lower unemployment is associated with higher inflation.

Question 12

If the real exchange rate between the US and Switzerland is calculated as $$e = \frac{P_{Dom} 	imes E}{P_{For}}$$, what happens to the real exchange rate if the price level in the US ($$P_{Dom}) $$increases, holding everything else constant?

Accepted Answer

The real exchange rate increases, making US goods more expensive relative to Swiss goods.

Question 13

Which of the following is NOT included in the calculation of M1 money supply?

Accepted Answer

Credit cards

Question 14

If a country’s actual GDP is below its potential GDP, which of the following is most likely true?

Accepted Answer

The economy is experiencing a recessionary gap and unemployment is above the natural rate.

Question 15

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

Accepted Answer

A decrease in taxes

Question 16

Which of the following best explains the concept of convergence in economic growth?

Accepted Answer

Poorer countries tend to grow faster than richer countries, allowing them to catch up in terms of GDP per capita.

Question 17

Which of the following is a determinant of consumption according to the consumption function?

Accepted Answer

Current disposable income

Question 18

If the marginal propensity to consume (MPC) is 0.8, what is the marginal propensity to save (MPS)?

Accepted Answer

$$MPS = 1 - MPC = 1 - 0.8 = 0.2$$

Question 19

Which of the following would cause a country’s currency to appreciate in the foreign exchange market?

Accepted Answer

An increase in the domestic real interest rate relative to other countries

Question 20

Which of the following is an example of structural unemployment?

Accepted Answer

A worker whose skills are no longer needed due to technological change

Comprehensive Study Notes: Core Concepts in Macroeconomics

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