Q: If the Consumer Price Index (CPI) was $$210 in 2021 $$and $$220 in 2022$$, what was the inflation rate between 2021 and 2022?

$$\frac{220 - 210}{210} \times 100 = 4.76\%$$

Q: A country has a population of $$100$$ million. $$60$$ million are in the labor force, $$54$$ million are employed, and $$6$$ million are unemployed. What is the unemployment rate?

$$\frac{6}{60} \times 100 = 10\%$$

Q: Suppose the real GDP of a country was $$\2$$,000$$ billion in 2020 and $$\$$2,100$$ billion in 2021. What was the growth rate of real GDP from 2020 to 2021?

$$\frac{2,100 - 2,000}{2,000} \times 100 = 5\%$$

Question 1

Which of the following is included in the calculation of Gross Domestic Product (GDP) for a country in a given year?

Accepted Answer

The value of a new car produced and sold domestically during the year.

Question 2

Suppose the nominal GDP of a country in 2022 is $$\5$$,000$$ billion and the GDP deflator is 125$. What is the real GDP for 2022?

Accepted Answer

$$\4$$,000$ billion

Question 3

Which of the following is a shortcoming of using GDP as a measure of economic well-being?

Accepted Answer

GDP does not account for the value of household production.

Question 4

If the Consumer Price Index (CPI) was $$210 in 2021 $$and $$220 in 2022$$, what was the inflation rate between 2021 and 2022?

Accepted Answer

$$\frac{220 - 210}{210} 	imes 100 = 4.76\%$$

Question 5

A country has a population of $$100$$ million. $$60$$ million are in the labor force, $$54$$ million are employed, and $$6$$ million are unemployed. What is the unemployment rate?

Accepted Answer

$$\frac{6}{60} 	imes 100 = 10\%$$

Question 6

Which of the following best describes 'discouraged workers'?

Accepted Answer

Individuals who have stopped looking for work because they believe no jobs are available for them.

Question 7

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

Accepted Answer

$$8\% - 3\% = 5\%$$

Question 8

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker loses their job because their skills are no longer needed due to automation.

Question 9

Suppose the real GDP of a country was $$\2$$,000$$ billion in 2020 and $$\$$2,100$$ billion in 2021. What was the growth rate of real GDP from 2020 to 2021?

Accepted Answer

$$\frac{2,100 - 2,000}{2,000} 	imes 100 = 5\%$$

Question 10

According to the Rule of 70, how many years will it take for an economy growing at $$2\%$$ per year to double its real GDP?

Accepted Answer

$$\frac{70}{2} = 35$$ years

Question 11

Which of the following is a determinant of long-run economic growth?

Accepted Answer

Increases in human capital, such as education and training.

Question 12

If the government increases its budget deficit, what is the likely effect in the market for loanable funds?

Accepted Answer

The supply of loanable funds decreases, leading to higher interest rates.

Question 13

Which of the following best describes the difference between direct finance and indirect finance?

Accepted Answer

Direct finance involves borrowers selling securities directly to savers, while indirect finance involves financial intermediaries such as banks.

Question 14

If the labor force participation rate is $$70\%$$ and the working-age population is $$200$$ million, what is the size of the labor force?

Accepted Answer

$$200 	imes 0.70 = 140$$ million

Question 15

Which of the following is a shortcoming of the Consumer Price Index (CPI) as a measure of the cost of living?

Accepted Answer

CPI does not account for substitution bias when consumers switch to cheaper goods.

Question 16

Suppose the government increases its spending without increasing taxes, leading to a higher budget deficit. According to the concept of 'crowding out,' what is the likely effect on private investment?

Accepted Answer

Private investment decreases due to higher interest rates.

Question 17

If nominal GDP increases by $$10\%$$ and the GDP deflator increases by $$4\%$$, what is the approximate percentage increase in real GDP?

Accepted Answer

$$10\% - 4\% = 6\%$$

Question 18

Which of the following best describes the 'natural rate of unemployment'?

Accepted Answer

The sum of frictional and structural unemployment when the economy is at full employment.

Question 19

A country’s actual GDP is below its potential GDP. Which of the following is most likely true?

Accepted Answer

The country is experiencing a recession and cyclical unemployment is positive.

Question 20

If a country’s savings rate increases, what is the likely effect on the market for loanable funds and long-run economic growth?

Accepted Answer

The supply of loanable funds increases, leading to lower interest rates and higher investment, which promotes long-run growth.

Macroeconomics Exam 2 Study Guide: GDP, Unemployment, and Economic Growth

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