Question 1

Suppose a bakery buys flour for $$100, uses it to bake bread, and sells the bread for 300. $$What is the contribution to GDP from these transactions?

Accepted Answer

$200, because only the value added by the bakery is counted in GDP.

Question 2

Which of the following best describes the GDP deflator?

Accepted Answer

A price index that measures the change in prices of all final goods and services produced domestically.

Question 3

If nominal GDP in 2025 is $$ \20$${,}000 $$ and the GDP deflator is  125$$ $, what is real GDP in 2025?

Accepted Answer

$$ \16$${,}000 $

Question 4

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

Accepted Answer

The value of used cars sold in the current year.

Question 5

If the Consumer Price Index (CPI) was $$ 120  in 2020 $$and $$ 132  in 2021$$, what was the inflation rate between 2020 and 2021?

Accepted Answer

$$ 10\% $$

Question 6

Which of the following best explains the difference between nominal and real GDP?

Accepted Answer

Nominal GDP is measured using current prices, while real GDP is measured using constant base-year prices.

Question 7

Suppose the labor force is 150 million, and 15 million people are unemployed. What is the unemployment rate?

Accepted Answer

$$ 10\% $$

Question 8

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker loses their job because their skills are no longer needed due to automation.

Question 9

If the labor force participation rate (LFPR) is $$ 62\% $$ and the working-age population is 200 million, what is the size of the labor force?

Accepted Answer

124 million

Question 10

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

Accepted Answer

$$ 5\% $$

Question 11

Which of the following best describes the 'Rule of 70'?

Accepted Answer

It estimates the number of years for a variable to double by dividing 70 by the annual growth rate.

Question 12

If a country’s real GDP grows at $$ 2\% $$ per year, approximately how many years will it take for its real GDP to double?

Accepted Answer

35 years

Question 13

Which of the following is a cost of unanticipated inflation?

Accepted Answer

It arbitrarily redistributes income between borrowers and lenders.

Question 14

Suppose the CPI in 2010 was $$ 110 $$ and in 2020 it was $$ 154 . If a $$worker earned $$ \40$${,}000 $ in 2010, what is the equivalent salary in 2020 dollars?

Accepted Answer

$$ \56$${,}000 $

Question 15

Which of the following is NOT a component of GDP when using the expenditure approach?

Accepted Answer

Transfer payments

Question 16

During a recession, which of the following typically increases?

Accepted Answer

Cyclical unemployment

Question 17

If the employment-population ratio is $$ 60\% $$ and the working-age population is 250 million, how many people are employed?

Accepted Answer

150 million

Question 18

Which of the following best describes frictional unemployment?

Accepted Answer

Unemployment that results from the time it takes to match workers with jobs.

Question 19

If a country’s saving rate increases, what is the most likely long-term effect on economic growth?

Accepted Answer

Higher saving leads to more investment, which can increase long-term economic growth.

Question 20

Which of the following statements about the business cycle is correct?

Accepted Answer

The business cycle refers to short-term fluctuations in real GDP around its long-term trend.

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

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