Q: Suppose the real GDP of a country grows from $$2,000$$ billion to $$2,100$$ billion in one year. What is the growth rate of real GDP for that year?

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

Q: Suppose a country has a nominal exchange rate of $$2$$ pesos per dollar, a domestic price level of $$100$$, and a foreign price level of $$50. $$What is the real exchange rate?

$$2 \times \frac{100}{50} = 4$$

Question 1

Suppose the real GDP of a country grows from $$2,000$$ billion to $$2,100$$ billion in one year. What is the growth rate of real GDP for that year?

Accepted Answer

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

Question 2

If a country's real GDP per capita is growing at a constant rate of $$2\%$$ per year, approximately how many years will it take for real GDP per capita to double, according to the Rule of 70?

Accepted Answer

$$70 \div 2 = 35$$ years

Question 3

Which of the following best describes the difference between human capital and technology as determinants of productivity?

Accepted Answer

Human capital refers to the knowledge and skills of workers, while technology refers to the processes used to turn inputs into outputs.

Question 4

A government introduces a policy that lowers taxes on interest income. According to the loanable funds model, what is the most likely effect on the market for loanable funds?

Accepted Answer

The supply of loanable funds shifts to the right, lowering the real interest rate and increasing the quantity of investment.

Question 5

According to the Solow Growth Model, what happens to the marginal increase in output as capital per worker increases, holding technology constant?

Accepted Answer

The marginal increase in output diminishes due to diminishing returns to capital.

Question 6

Suppose a country has a nominal exchange rate of $$2$$ pesos per dollar, a domestic price level of $$100$$, and a foreign price level of $$50. $$What is the real exchange rate?

Accepted Answer

$$2 	imes \frac{100}{50} = 4$$

Question 7

If the required reserve ratio is $$10\%$$, what is the value of the money multiplier?

Accepted Answer

$$\frac{1}{0.10} = 10$$

Question 8

Which of the following is NOT a function of money?

Accepted Answer

Providing a source of government revenue

Question 9

A country has the following data: $$Y = 1,000$$, $$T = 200$$, $$C = 700$$, $$G = 150. $$What is the value of national savings?

Accepted Answer

$$(Y - T - C) + (T - G) = (1,000 - 200 - 700) + (200 - 150) = 100 + 50 = 150$$

Question 10

Which of the following best describes the concept of monetary neutrality?

Accepted Answer

Changes in the money supply affect only nominal variables, not real variables, in the long run.

Question 11

During a period of hyperinflation, which of the following is most likely to occur?

Accepted Answer

The value of money falls rapidly, and prices increase at an accelerating rate.

Question 12

If the Federal Reserve wants to decrease inflation, which of the following actions is it most likely to take?

Accepted Answer

Increase the interest rate by selling government securities, leading to a decrease in the money supply.

Question 13

Which of the following statements about the short-run Phillips curve is correct?

Accepted Answer

There is an inverse relationship between inflation and unemployment in the short run.

Question 14

Suppose the government runs a budget deficit. According to the loanable funds model, what is the likely effect on the market for loanable funds?

Accepted Answer

The demand for loanable funds shifts to the right, increasing the real interest rate and reducing private investment.

Question 15

If a country’s currency appreciates, what is the most likely effect on its net exports?

Accepted Answer

Net exports decrease because exports become more expensive for foreign buyers.

Question 16

Which of the following is a key implication of the catch-up effect in economic growth?

Accepted Answer

Poor countries tend to grow faster than rich countries because they have less capital per worker.

Question 17

Which of the following best describes the relationship between money supply growth and inflation in the long run, according to the quantity theory of money?

Accepted Answer

A higher rate of money supply growth leads to a higher rate of inflation.

Question 18

If a country is a closed economy, which of the following must be true?

Accepted Answer

It does not engage in trade or financial transactions with other countries.

Question 19

Suppose the nominal exchange rate between the euro and the dollar is $$1.2$$ dollars per euro. If the price level in the US is $$120$$ and in Europe is $$100$$, what is the real exchange rate of the dollar in terms of the euro?

Accepted Answer

$$1.2 	imes \frac{120}{100} = 1.44$$

Question 20

Which of the following is a direct result of the Federal Reserve acting as the lender of last resort?

Accepted Answer

It provides liquidity to banks to prevent collapse during financial crises.

Macroeconomics Study Guide: Economic Growth, Financial Systems, Money, Monetary Policy, and Open Economy

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