Q: If nominal GDP in 2025 is $$22 trillion and real GDP in 2025 (base year 2015) is 20 $$trillion, what is the GDP deflator for 2025?

$$GDP\ deflator = 100 \times \frac{22}{20}$$

Question 1

Which of the following best describes the official unemployment rate (U-3) as measured by the Bureau of Labor Statistics (BLS)?

Accepted Answer

It includes people without a job who are actively searching for work.

Question 2

Suppose the labor market for barbers is in equilibrium, as shown in the diagram. If the market wage is set above the equilibrium wage by a new minimum wage law, what is the most likely outcome?

Accepted Answer

There will be excess supply of barbers, leading to unemployment.

Question 3

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

Accepted Answer

Purchases of used homes

Question 4

If the price of chicken rises significantly and consumers switch to buying more fish, which inflation measure is most likely to show a lower rate of inflation as a result?

Accepted Answer

Personal Consumption Expenditures (PCE) Price Index

Question 5

Which of the following best explains why the labor supply curve might shift to the right?

Accepted Answer

A change in preferences that makes work more attractive

Question 6

Consider the following production function: $$Y = A \cdot F(K, L)$$, where $$Y is $$output, $$A is $$technology, $$K is $$physical capital, and $$L is $$labor. If $$A$$ increases while $$K$$ and $$L$$ remain constant, what happens to output?

Accepted Answer

Output increases because technology improves productivity.

Question 7

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker laid off because their skills are no longer in demand due to automation

Question 8

If nominal GDP in 2025 is $$22 trillion and real GDP in 2025 (base year 2015) is 20 $$trillion, what is the GDP deflator for 2025?

Accepted Answer

$$GDP\ deflator = 100 	imes \frac{22}{20}$$

Question 9

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone

Question 10

A country’s GDP per capita increases, but its GDP per worker remains unchanged. Which of the following is the most likely explanation?

Accepted Answer

The number of workers relative to the population has increased.

Question 11

Which of the following is a reason why the official unemployment rate (U-3) might understate the true level of labor underutilization?

Accepted Answer

It excludes people working part-time for economic reasons.

Question 12

If the supply of coffee decreases due to a drought in Brazil, what happens to the equilibrium price and quantity of coffee?

Accepted Answer

Price increases, quantity decreases

Question 13

Which of the following best explains why the CPI may overstate inflation compared to the PCE price index?

Accepted Answer

The CPI uses a fixed basket of goods and does not account for consumer substitution.

Question 14

Which of the following is an example of a positive correlation that does NOT imply causation?

Accepted Answer

Ice cream sales and drowning incidents both increase in the summer.

Question 15

If a country’s aggregate production function exhibits diminishing marginal product of capital, what happens as more physical capital is added, holding other inputs constant?

Accepted Answer

Each additional unit of capital increases output by a smaller amount.

Question 16

Which of the following is NOT a reason for wage rigidity leading to structural unemployment?

Accepted Answer

Perfect competition in the labor market

Question 17

If the inflation rate is calculated as $$	ext{Inflation Rate} = \frac{	ext{Index}_t - 	ext{Index}_{t-1}}{	ext{Index}_{t-1}} 	imes 100$$, what is the inflation rate if the price index rises from 120 to 126 in one year?

Accepted Answer

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

Question 18

Which of the following is a direct effect of technological progress on economic growth, as shown in the aggregate production function?

Accepted Answer

It increases the marginal product of capital and labor.

Question 19

Which of the following best describes the relationship between GDP per capita and the income of the poorest 10% of a country’s population, as shown in the scatterplot?

Accepted Answer

Higher GDP per capita is generally associated with higher income for the poorest 10%.

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