Q: Suppose the Consumer Price Index (CPI) was 200 in the current year and 180 in the previous year. What is the inflation rate?

$$ \frac{200 - 180}{180} \times 100 = 11.1\% $$

Question 1

Which of the following is included in the calculation of a country's GDP using the expenditure approach?

Accepted Answer

Government spending on infrastructure projects

Question 2

Suppose the Consumer Price Index (CPI) was 200 in the current year and 180 in the previous year. What is the inflation rate?

Accepted Answer

$$ \frac{200 - 180}{180} 	imes 100 = 11.1\% $$

Question 3

If the unemployment rate is calculated as $$ \frac{	ext{Unemployed}}{	ext{Labor Force}} 	imes 100 $$, which of the following would cause the unemployment rate to rise, all else equal?

Accepted Answer

A rise in the number of people actively seeking work but unable to find jobs

Question 4

Which of the following best explains why GDP does NOT measure the quality of the environment?

Accepted Answer

GDP only counts market transactions and ignores non-market impacts such as pollution

Question 5

If U.S. inflation is higher than foreign inflation, what is the likely effect on U.S. net exports (NX)?

Accepted Answer

Net exports fall because U.S. goods become more expensive for foreigners

Question 6

Which of the following would cause a shift of the Aggregate Demand (AD) curve to the right?

Accepted Answer

An increase in government spending

Question 7

If the equilibrium is to the left of the Long-Run Aggregate Supply (LRAS), which of the following is true?

Accepted Answer

The economy is in a recessionary gap with high unemployment

Question 8

Which of the following is a likely result if Aggregate Expenditure (AE) is greater than GDP?

Accepted Answer

Unplanned inventories fall and production rises

Question 9

Which of the following would shift the Short-Run Aggregate Supply (SRAS) curve to the left?

Accepted Answer

A rise in wages due to a tight labor market

Question 10

If the minimum wage is set above the market equilibrium wage, what is the likely effect on unemployment?

Accepted Answer

Unemployment rises due to a labor surplus

Question 11

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

Accepted Answer

Real GDP adjusts for inflation, while nominal GDP does not

Question 12

Suppose the labor force is 200 million and 10 million people are unemployed. What is the unemployment rate?

Accepted Answer

$$ \frac{10}{200} 	imes 100 = 5\% $$

Question 13

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate is searching for their first job

Question 14

If the price level increases, what happens to the quantity of real GDP demanded, according to the AD curve?

Accepted Answer

It decreases, moving up along the same AD curve

Question 15

Which of the following would NOT be counted in U.S. GNP?

Accepted Answer

Goods produced by a Japanese company in the U.S.

Question 16

If real interest rates fall, which of the following is most likely to occur?

Accepted Answer

Borrowing becomes cheaper and AD shifts right

Question 17

Which of the following is a leading economic indicator?

Accepted Answer

New building permits

Question 18

Which of the following would cause the Long-Run Aggregate Supply (LRAS) curve to shift to the right?

Accepted Answer

A technological improvement

Question 19

If the economy is in a recession, which of the following is most likely to occur in the long run according to the self-correction mechanism?

Accepted Answer

Wages fall and SRAS shifts right

Question 20

Which of the following best explains why the SRAS curve is upward sloping?

Accepted Answer

Because wages and prices are 'sticky' in the short run

Comprehensive Study Notes: GDP, Unemployment, Inflation, and Aggregate Models in Macroeconomics

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