Question 1

Suppose a bakery buys flour for $$100, uses it to bake bread, and sells the bread for 300. $$What is the contribution to GDP from these transactions?

Accepted Answer

$300, because only the value of final goods is counted in GDP.

Question 2

Which of the following best describes the GDP deflator?

Accepted Answer

A price index that measures the average price of all goods and services included in GDP.

Question 3

If nominal GDP in 2025 is $$20 trillion and the GDP deflator is 125, what is real GDP in 2025? Use the formula $$ 	ext{Real GDP} = \frac{	ext{Nominal GDP}}{	ext{GDP Deflator}} 	imes 100 $.

Accepted Answer

$$16$$ trillion

Question 4

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

The value of used cars sold in the current year.

Question 5

If the Consumer Price Index (CPI) was 200 in 2020 and 220 in 2021, what was the inflation rate between 2020 and 2021? Use the formula $$ 	ext{Inflation Rate} = \frac{	ext{CPI}_{2021} - 	ext{CPI}_{2020}}{	ext{CPI}_{2020}} 	imes 100 .$$

Accepted Answer

10%

Question 6

Which of the following best explains why real GDP is a better measure of economic growth than nominal GDP?

Accepted Answer

Real GDP adjusts for changes in the price level, while nominal GDP does not.

Question 7

Suppose the labor force in a country is 100 million, and 8 million people are unemployed. What is the unemployment rate? Use the formula $$ 	ext{Unemployment Rate} = \frac{	ext{Number of Unemployed}}{	ext{Labor Force}} 	imes 100 .$$

Accepted Answer

8%

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

If the labor force participation rate (LFPR) is calculated as $$ 	ext{LFPR} = \frac{	ext{Labor Force}}{	ext{Working Age Population}} 	imes 100 $$, what is the LFPR if the labor force is 150 million and the working age population is 200 million?

Accepted Answer

75%

Question 10

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

Accepted Answer

The real interest rate is the nominal interest rate adjusted for inflation.

Question 11

If the nominal interest rate is 6% and the inflation rate is 2%, what is the real interest rate? Use the formula $$ 	ext{Real Interest Rate} = 	ext{Nominal Interest Rate} - 	ext{Inflation Rate} .$$

Accepted Answer

4%

Question 12

Which of the following is a cost of unanticipated inflation?

Accepted Answer

It redistributes wealth from lenders to borrowers.

Question 13

If a country’s real GDP grows at an average annual rate of 2%, approximately how many years will it take for real GDP to double? Use the Rule of 70: $$ 	ext{Years to Double} = \frac{70}{	ext{Growth Rate}} .$$

Accepted Answer

35 years

Question 14

Which of the following is NOT considered a component of GDP using the expenditure approach?

Accepted Answer

Transfer payments such as Social Security benefits.

Question 15

Suppose the CPI in 2010 was 150 and in 2020 it was 180. If a worker earned $$45,000 in 2010, what is the equivalent salary in 2020 dollars? Use the formula $$ 	ext{Salary}_{2020} = 	ext{Salary}_{2010} 	imes \frac{	ext{CPI}_{2020}}{	ext{CPI}_{2010}} $.

Accepted Answer

$54,000

Question 16

Which of the following best describes cyclical unemployment?

Accepted Answer

Unemployment caused by downturns in the business cycle.

Question 17

If the employment-population ratio is calculated as $$ 	ext{EMPL/POP} = \frac{	ext{Employed}}{	ext{Working Age Population}} 	imes 100 $$, what is the ratio if there are 120 million employed and 200 million working age population?

Accepted Answer

60%

Question 18

Which of the following scenarios would cause nominal GDP to increase but not real GDP?

Accepted Answer

An increase in the price level with no change in output.

Question 19

Which of the following is a function of the financial system in promoting economic growth?

Accepted Answer

Channeling funds from savers to borrowers for investment.

Question 20

During a recession, which of the following typically occurs in the business cycle?

Accepted Answer

Real GDP decreases and unemployment rises.

Macroeconomics: Exam One Study Guide – GDP, Unemployment, Inflation, and Economic Growth

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