Q: Suppose a country’s nominal GDP in 2025 is $$\1$$,200$$ billion and its real GDP (in 2020 dollars) is $$\$$1,000$$ billion. What is the value of the GDP deflator for 2025?

$$\frac{1,200}{1,000} \times 100 = 120$$

Q: A country’s labor force consists of 150 million employed and 10 million unemployed people. What is the labor force participation rate if the adult population is 200 million?

$$\frac{150 + 10}{200} \times 100 = 80\%$$

Q: Suppose the price level in 2024 is 120 and in 2025 it is 132. What is the inflation rate between 2024 and 2025?

$$\frac{132 - 120}{120} \times 100 = 10\%$$

Question 1

Suppose a country’s nominal GDP in 2025 is $$\1$$,200$$ billion and its real GDP (in 2020 dollars) is $$\$$1,000$$ billion. What is the value of the GDP deflator for 2025?

Accepted Answer

$$\frac{1,200}{1,000} 	imes 100 = 120$$

Question 2

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

Accepted Answer

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

Question 3

A country’s labor force consists of 150 million employed and 10 million unemployed people. What is the labor force participation rate if the adult population is 200 million?

Accepted Answer

$$\frac{150 + 10}{200} 	imes 100 = 80\%$$

Question 4

If the nominal GDP grew from $$\2$$,000$$ billion to $$\$$2,200$$ billion in one year, and the GDP deflator increased from 100 to 110, what is the real GDP growth rate?

Accepted Answer

$$\frac{2,200/110}{2,000/100} - 1 = \frac{20}{20} - 1 = 0\%$$

Question 5

Which of the following is an example of a leakage in the circular flow model?

Accepted Answer

Households saving part of their income in banks

Question 6

If the unemployment rate (U-3) is calculated as $$\frac{	ext{Unemployed}}{	ext{Labor Force}} 	imes 100$$, which of the following would NOT be included in the numerator?

Accepted Answer

A discouraged worker who has stopped looking for a job

Question 7

Which of the following best illustrates Adam Smith’s theory of the 'Invisible Hand'?

Accepted Answer

Self-interested individuals pursuing profit unintentionally contribute to the overall economic welfare.

Question 8

Suppose the price level in 2024 is 120 and in 2025 it is 132. What is the inflation rate between 2024 and 2025?

Accepted Answer

$$\frac{132 - 120}{120} 	imes 100 = 10\%$$

Question 9

Which of the following would be counted as part of planned investment in GDP calculations?

Accepted Answer

A firm building a new factory

Question 10

If actual investment is less than planned investment, what is most likely happening in the economy?

Accepted Answer

Firms are selling less than expected, leading to an unplanned increase in inventories.

Question 11

Which of the following is NOT a component of the expenditure approach to calculating GDP?

Accepted Answer

Transfer payments such as Social Security

Question 12

A country’s nominal GDP increased by 8% while its real GDP increased by 3%. What was the approximate inflation rate?

Accepted Answer

$$8\% - 3\% = 5\%$$

Question 13

Which of the following would cause a shift in the demand curve for new cars to the right?

Accepted Answer

An increase in consumer incomes

Question 14

If the labor force is 100 million, the number of unemployed is 8 million, and the number of marginally attached workers is 2 million, what is the U-5 unemployment rate?

Accepted Answer

$$\frac{8 + 2}{100 + 2} 	imes 100 = 9.8\%$$

Question 15

Which of the following is an example of a secular trend in labor market data?

Accepted Answer

A steady increase in female labor force participation over several decades

Question 16

If a country’s real GDP per capita grows at a constant rate of 2% per year, approximately how many years will it take for real GDP per capita to double?

Accepted Answer

$$\frac{70}{2} = 35$$ years (using the Rule of 70)

Question 17

Which of the following would be considered an injection in the circular flow model?

Accepted Answer

Government spending on public education

Question 18

If the labor force is 50 million, the number of unemployed is 5 million, and the number of part-time workers for economic reasons is 3 million, what is the U-6 unemployment rate?

Accepted Answer

$$\frac{5 + 3}{50} 	imes 100 = 16\%$$

Question 19

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

Accepted Answer

The value of used cars sold in the current year

Question 20

If the price level remains constant but nominal GDP increases, what must be true?

Accepted Answer

Real GDP has increased by the same percentage as nominal GDP.

Macroeconomics Exam 1 Study Guide: Growth Models, GDP, Labor Markets, and Core Concepts

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