Q: If the Consumer Price Index (CPI) increases from $$200 to$$ $$220$$ over a year, what is the annual inflation rate?

$$\displaystyle \frac{220-200}{200} \times 100 = 10\%$$

Q: If the CPI in 2010 is $$150$$ and the CPI in 2020 is $$180$$, what is the percentage increase in the price level over this period?

$$\displaystyle \frac{180-150}{150} \times 100 = 20\%$$

Question 1

Which of the following best explains why GDP is considered a poor measure of overall well-being in a country?

Accepted Answer

GDP does not measure non-market activities or income distribution.

Question 2

Suppose nominal GDP in 2022 is $$\20$ trillion and the GDP deflator is 125$. What is the real GDP for 2022?

Accepted Answer

$$\16$ trillion

Question 3

If the Consumer Price Index (CPI) increases from $$200 to$$ $$220$$ over a year, what is the annual inflation rate?

Accepted Answer

$$\displaystyle \frac{220-200}{200} 	imes 100 = 10\%$$

Question 4

Which of the following is NOT included in the calculation of GDP using the expenditure approach?

Accepted Answer

Purchases of stocks and bonds

Question 5

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

Accepted Answer

$$5\%$$

Question 6

Which of the following scenarios best illustrates cyclical unemployment?

Accepted Answer

A factory worker is laid off during a recession.

Question 7

If the labor force participation rate (LFPR) increases while the unemployment rate remains constant, what is the most likely effect on the number of employed people?

Accepted Answer

The number of employed people increases.

Question 8

Which of the following would cause a movement along the Aggregate Demand (AD) curve rather than a shift of the curve?

Accepted Answer

A change in the price level

Question 9

Suppose the economy is at full employment and there is a sudden negative supply shock (such as a sharp increase in oil prices). In the short run, what is the most likely effect on output and the price level?

Accepted Answer

Output decreases and the price level increases.

Question 10

Which of the following best describes the shape of the Long Run Aggregate Supply (LRAS) curve and why?

Accepted Answer

It is vertical because output is determined by resources and technology, not the price level.

Question 11

If the government increases its spending by $$\100$ billion and the marginal propensity to consume (MPC) is 0.8$, what is the total change in GDP according to the simple spending multiplier?

Accepted Answer

$$\500$ billion

Question 12

Which of the following would shift the Short Run Aggregate Supply (SRAS) curve to the right?

Accepted Answer

A decrease in business taxes

Question 13

If the CPI in 2010 is $$150$$ and the CPI in 2020 is $$180$$, what is the percentage increase in the price level over this period?

Accepted Answer

$$\displaystyle \frac{180-150}{150} 	imes 100 = 20\%$$

Question 14

Which of the following best explains why the Aggregate Expenditures Model is important for understanding macroeconomic equilibrium?

Accepted Answer

It explains how total spending determines the level of output and employment.

Question 15

A country experiences an increase in exports due to higher foreign incomes. What is the likely effect on Aggregate Demand (AD) and equilibrium GDP?

Accepted Answer

AD shifts right and equilibrium GDP increases.

Question 16

If the nominal wage is fixed in the short run, what is the effect of an increase in the price level on the quantity of output supplied?

Accepted Answer

Firms increase output because real wages fall.

Question 17

Which of the following is an example of frictional unemployment?

Accepted Answer

A worker leaves their job to search for a better one.

Question 18

If the government wants to close a recessionary gap using fiscal policy, which of the following actions would be most effective?

Accepted Answer

Increase government spending

Question 19

Suppose the economy is experiencing demand-pull inflation. Which of the following is the most likely cause?

Accepted Answer

An increase in aggregate demand

Question 20

If the unemployment rate is $$6\%$$, the labor force is $$150$$ million, and the number of unemployed people is $$9$$ million, what is the number of employed people?

Accepted Answer

$$141$$ million

Macroeconomics Study Notes: GDP, Inflation & Unemployment, Aggregate Expenditures, and AD/AS Models

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