Q: If the Consumer Price Index (CPI) increases from 220 to 242 over one year, what is the annual inflation rate?

$$ \frac{242 - 220}{220} \times 100 = 10\% $$

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

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

Question 1

Which of the following is NOT one of the three primary goals of macroeconomic policy?

Accepted Answer

Maximizing government spending

Question 2

Suppose the U.S. government increases its borrowing, leading to higher interest rates. What is the most likely macroeconomic effect according to the 'crowding-out effect'?

Accepted Answer

Private investment will decrease as higher interest rates discourage borrowing

Question 3

If the Consumer Price Index (CPI) increases from 220 to 242 over one year, what is the annual inflation rate?

Accepted Answer

$$ \frac{242 - 220}{220} 	imes 100 = 10\% $$

Question 4

Which type of unemployment is most likely to increase during a recession?

Accepted Answer

Cyclical unemployment

Question 5

Given the GDP identity $$ Y = C + I + G + (X - M) $$, what does the term $$(X - M)$$ represent?

Accepted Answer

Net exports (exports minus imports)

Question 6

If actual GDP is $$15$$ trillion and potential GDP is $$16$$ trillion, what is the GDP gap?

Accepted Answer

$$ 1 $$ trillion

Question 7

Which of the following would NOT be included in the calculation of GDP?

Accepted Answer

A cash payment for babysitting that is not reported

Question 8

If the nominal interest rate is $$6\%$$ and the inflation rate is $$2\%$$, what is the real interest rate?

Accepted Answer

$$ 4\% $$

Question 9

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

Accepted Answer

Real GDP measures the value of output at constant prices, nominal GDP at current prices

Question 10

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

Accepted Answer

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

Question 11

Which of the following is an example of structural unemployment?

Accepted Answer

A coal miner whose job is lost due to a shift to renewable energy

Question 12

If the government runs a budget deficit, what is the likely impact on the supply of national saving and the real interest rate?

Accepted Answer

Supply of saving decreases, real interest rate rises

Question 13

Which of the following factors would shift the demand curve for labor to the right?

Accepted Answer

An increase in capital investment

Question 14

According to the production function $$ Y = f(K, L) $$, what does an increase in $$K ($$capital) typically result in, holding $$L ($$labor) constant?

Accepted Answer

An increase in output $$Y$$

Question 15

Which of the following is a noneconomic cost of unemployment?

Accepted Answer

Psychological distress

Question 16

If a country’s real GDP per capita increases over time, which of the following is most likely to occur?

Accepted Answer

The standard of living increases

Question 17

Which of the following would cause the investment demand curve to shift to the right?

Accepted Answer

A technological advancement

Question 18

If inflation is unexpectedly high, who benefits the most?

Accepted Answer

Borrowers who repay loans with money that has less purchasing power

Question 19

Which of the following is a limitation of GDP as a measure of welfare?

Accepted Answer

It does not reflect the quality of goods and services produced

Macroeconomics: Growth, Employment, Unemployment, and Measurement

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