Q: If the Consumer Price Index (CPI) was 120 in 2022 and 126 in 2023, what was the inflation rate between 2022 and 2023?

$$\frac{126 - 120}{120} \times 100 = 5\%$$

Q: A country has a population of 200 million, of which 120 million are in the labor force. If 114 million are employed, what is the unemployment rate?

$$\frac{6}{120} \times 100 = 5\%$$

Q: If nominal GDP in 2022 is $$\1$$,100$$ billion and the GDP deflator is 110$, what is real GDP in 2022?

$$\frac{1,100}{110} \times 100 = \1$$,000$ billion

Q: If the labor force participation rate is 70% and the working-age population is 150 million, what is the size of the labor force?

$$150 \times 0.7 = 105$$ million

Question 1

Suppose a country produces only two goods: cars and computers. In 2020, it produced 100 cars at $$20,000 each and 200 computers at 1$$,000 each. In 2021, it produced 110 cars at $$22,000 each and 220 computers at 1$$,100 each. Using 2020 as the base year, what is the real GDP for 2021?

Accepted Answer

$$\2$$,420,000$

Question 2

Which of the following best describes the difference between GDP and GNP?

Accepted Answer

GDP measures the value of all final goods and services produced within a country's borders; GNP measures the value of all goods and services produced by a country's citizens, regardless of location.

Question 3

If the Consumer Price Index (CPI) was 120 in 2022 and 126 in 2023, what was the inflation rate between 2022 and 2023?

Accepted Answer

$$\frac{126 - 120}{120} 	imes 100 = 5\%$$

Question 4

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

Accepted Answer

The sale of used furniture at a garage sale

Question 5

A country has a population of 200 million, of which 120 million are in the labor force. If 114 million are employed, what is the unemployment rate?

Accepted Answer

$$\frac{6}{120} 	imes 100 = 5\%$$

Question 6

Which of the following best illustrates structural unemployment?

Accepted Answer

A factory worker loses their job because the factory relocates overseas and their skills are no longer in demand

Question 7

If nominal GDP in 2022 is $$\1$$,100$$ billion and the GDP deflator is 110$, what is real GDP in 2022?

Accepted Answer

$$\frac{1,100}{110} 	imes 100 = \1$$,000$ billion

Question 8

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

Accepted Answer

GDP does not account for the value of leisure time

Question 9

If the labor force participation rate is 70% and the working-age population is 150 million, what is the size of the labor force?

Accepted Answer

$$150 	imes 0.7 = 105$$ million

Question 10

Suppose the nominal interest rate on a savings account is 4% and the inflation rate is 2%. What is the real interest rate?

Accepted Answer

$$4\% - 2\% = 2\%$$

Question 11

Which of the following would cause a rightward shift in the supply of loanable funds?

Accepted Answer

An increase in foreign investment in domestic bonds

Question 12

If a country’s real GDP grows at an annual rate of 2%, approximately how many years will it take for its real GDP to double according to the Rule of 70?

Accepted Answer

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

Question 13

Which of the following best describes the concept of 'creative destruction'?

Accepted Answer

The process by which new innovations cause old industries or technologies to become obsolete

Question 14

If the CPI basket cost $$\500$ in the base year and $$\$$600 in $$the current year, what is the value of the CPI in the current year?

Accepted Answer

$$\frac{600}{500} 	imes 100 = 120$$

Question 15

Which of the following is an example of a transfer payment?

Accepted Answer

A government pension paid to a retired worker

Question 16

If a country’s per capita real GDP increases, which of the following must be true?

Accepted Answer

Real GDP is growing faster than the population

Question 17

Which of the following would be considered an intermediate good?

Accepted Answer

Steel purchased by an automobile manufacturer

Question 18

If the government runs a budget deficit, what is the likely effect on the loanable funds market?

Accepted Answer

The supply of loanable funds decreases, raising the equilibrium interest rate

Question 19

Which of the following is a cost of inflation?

Accepted Answer

Menu costs, such as the expense of changing prices in restaurants

Question 20

Suppose the per worker production function is $$Y = A K$$^{0.5}$$ L$$^{0.5}$$, where A$ is total factor productivity, K$ is capital, and L$ is labor. If A$ increases while K$ and L$ remain constant, what happens?

Accepted Answer

There is an upward shift of the production function, increasing output per worker

Macroeconomics Study Guide: GDP, Unemployment, Inflation, and Economic Growth

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