Q: Suppose the Consumer Price Index (CPI) in the base year is 100, and in the current year it is 120. What is the inflation rate?

$ \frac{120 - 100}{100} \times 100 = 20\% $

Question 1

Which of the following is included in the calculation of a country's Gross Domestic Product (GDP)?

Accepted Answer

The value of a new car produced in the country and sold to a consumer

Question 2

Suppose the Consumer Price Index (CPI) in the base year is 100, and in the current year it is 120. What is the inflation rate?

Accepted Answer

$ \frac{120 - 100}{100} 	imes 100 = 20\% $

Question 3

Which of the following would cause the short-run aggregate supply (SRAS) curve to shift to the right?

Accepted Answer

A decrease in input costs

Question 4

If the equilibrium in the AD-AS model is to the left of the Long-Run Aggregate Supply (LRAS), which of the following is true?

Accepted Answer

The economy is experiencing a recessionary gap

Question 5

A U.S. company produces cars in Japan. Which country's GDP and GNP does this production count toward?

Accepted Answer

Japan's GDP and U.S. GNP

Question 6

Which of the following is NOT measured by GDP?

Accepted Answer

The value of household production such as cooking and cleaning

Question 7

If the minimum wage is set above the market wage, what is the likely effect on unemployment?

Accepted Answer

Unemployment will rise as labor supply exceeds labor demand

Question 8

Which of the following best describes frictional unemployment?

Accepted Answer

Unemployment that occurs when people are between jobs or are new graduates

Question 9

If aggregate expenditure (AE) is greater than GDP, what will happen in the economy?

Accepted Answer

Unplanned inventories will fall and production will rise

Question 10

Which of the following would cause the aggregate demand (AD) curve to shift to the right?

Accepted Answer

An increase in net exports due to a weaker domestic currency

Question 11

Given the GDP formula $ GDP = C + I + G + NX $, what does 'NX' represent?

Accepted Answer

Net exports, calculated as exports minus imports

Question 12

If the Consumer Price Index (CPI) increases faster than wages, what happens to purchasing power?

Accepted Answer

Purchasing power decreases

Question 13

Which of the following is true about the Long-Run Aggregate Supply (LRAS) curve?

Accepted Answer

It is vertical at the level of potential GDP

Question 14

Suppose the unemployment rate is calculated as $ \frac{	ext{unemployed}}{	ext{labor force}} 	imes 100 $. If there are 8 million unemployed and 92 million employed, what is the unemployment rate?

Accepted Answer

$ \frac{8}{100} 	imes 100 = 8\% $

Question 15

Which of the following would NOT cause a shift in the aggregate demand (AD) curve?

Accepted Answer

A change in the price level

Question 16

If the U.S. inflation rate is lower than that of its trading partners, what is the likely effect on U.S. net exports?

Accepted Answer

U.S. goods become cheaper, so exports increase

Question 17

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment due to skills no longer being needed in the labor market

Question 18

If the government increases spending, what is the likely effect on the aggregate demand (AD) curve?

Accepted Answer

AD shifts to the right

Question 19

Which of the following would cause the short-run aggregate supply (SRAS) curve to shift to the left?

Accepted Answer

An increase in wages

Question 20

If the price level increases and all else remains constant, what happens in the AD-AS model?

Accepted Answer

There is a movement up along the aggregate demand curve

Macroeconomics Final Exam Study Guide: GDP, Unemployment, Inflation, Aggregate Demand & Supply

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