Q: The labor force participation rate is calculated as:

$$\frac{\text{Labor Force}}{\text{Total Population}} \times 100$$

Question 1

Which of the following is an example of a macroeconomic issue?

Accepted Answer

Explaining why the U.S. Recession of 2008-2009 was accompanied by price deflation.

Question 2

Which of the following statements is a normative economic statement?

Accepted Answer

New York State should raise income tax rates on New Yorkers who earn more than 1 million dollars per year.

Question 3

Robinson Crusoe spends 8 hours per day working. It takes him 1 hour to catch 2 fish and 1 hour to grab 1 coconut. What is the maximum number of fish and coconuts he can produce in a day if he only catches fish or only grabs coconuts?

Accepted Answer

16 fish or 8 coconuts

Question 4

Given Crusoe's production possibilities (1 hour = 2 fish or 1 coconut, 8 hours per day), what is the opportunity cost of 1 coconut in terms of fish?

Accepted Answer

$$2$$ fish

Question 5

If Crusoe doubles his climbing skills (can now grab 2 coconuts per hour) but his fishing skills remain the same, what happens to the opportunity cost of catching 1 fish in terms of coconuts?

Accepted Answer

It decreases from $$1 to$$ $$0.5$$ coconut per fish.

Question 6

In a perfectly competitive market for Macroeconomics textbooks, what happens if the price is set above the equilibrium price?

Accepted Answer

There will be excess supply of textbooks.

Question 7

Suppose in 1974, the demand for Macroeconomics textbooks decreases because students avoid economics. What is the likely effect on equilibrium price and quantity?

Accepted Answer

Both equilibrium price and quantity decrease.

Question 8

Which of the following is included in U.S. GDP but not in U.S. GNP?

Accepted Answer

Profits earned by a Belgian beer company producing beer in the U.S.

Question 9

Given the following data for a country:

Year 1: 50 units of Good A at $$2 each, 100 units of Good B at 1 $$each
Year 2: 100 units of Good A at $$2 each, 50 units of Good B at 1 $$each

What is the nominal GDP in Year 2?

Accepted Answer

$$250$$

Question 10

Using the data from the previous question, what happens to real GDP between Year 1 and Year 2 if Year 1 prices are used as the base year?

Accepted Answer

Real GDP stays the same.

Question 11

A U.S. citizen works for a U.S. electronics firm in Belgium. In which of the following is her salary included?

Accepted Answer

U.S. GNP and Belgian GDP

Question 12

The labor force participation rate is calculated as:

Accepted Answer

$$\frac{	ext{Labor Force}}{	ext{Total Population}} 	imes 100$$

Question 13

If the BLS population is 100, the labor force is 80, and there are 8 unemployed persons, what is the unemployment rate?

Accepted Answer

$$10\%$$

Question 14

In 2025, the BLS population is 100, the labor force is 60, and there are 3 unemployed persons. What is the employment rate?

Accepted Answer

$$95\% of $$the labor force

Question 15

Which of the following best illustrates the 'discouraged worker effect'?

Accepted Answer

A decrease in the labor force participation rate as some unemployed stop looking for work.

Question 16

The Consumer Price Index (CPI) is best described as:

Accepted Answer

A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Question 17

Which of the following best defines inflation?

Accepted Answer

A sustained increase in the general price level of goods and services in an economy over a period of time.

Question 18

Deflation is most accurately described as:

Accepted Answer

A sustained decrease in the general price level of goods and services.

Question 19

Suppose the labor force in a country falls from 80 to 60, while the number of unemployed falls from 8 to 3. What is a likely explanation for this change?

Accepted Answer

A large number of discouraged workers have left the labor force.

Question 20

If nominal GDP increases from $$150 to$$ $$250$$ but real GDP remains unchanged, what does this indicate?

Accepted Answer

There was an increase in the price level (inflation).

Macroeconomics Exam Study Guidance: Principles, Scarcity, Demand & Supply, National Income, Employment & Prices

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