Q: Suppose the cost of a basket of goods in 2024 is $$\120$ and the cost of the same basket in the base year (2020) is $$\$$100. $$What is the Consumer Price Index (CPI) for 2024?

$$\displaystyle CPI = \frac{120}{100} \times 100 = 120$$

Q: If the unemployment rate is calculated as $$\displaystyle \frac{\text{unemployed}}{\text{labor force}} \times 100$$, what is the unemployment rate if there are 2 million unemployed and 20 million in the labor force?

$$\displaystyle \frac{2}{20} \times 100 = 10\%$$

Q: If the inflation rate is calculated as $$\displaystyle \frac{CPI_{\text{new}} - CPI_{\text{old}}}{CPI_{\text{old}}} \times 100$$, what is the inflation rate if $$CPI_{\text{new}} = 120$$ and $$CPI_{\text{old}} = 100$$?

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

Question 1

Which of the following is NOT included in the calculation of GDP for a country?

Accepted Answer

Household production such as cooking and cleaning

Question 2

Suppose the cost of a basket of goods in 2024 is $$\120$ and the cost of the same basket in the base year (2020) is $$\$$100. $$What is the Consumer Price Index (CPI) for 2024?

Accepted Answer

$$\displaystyle CPI = \frac{120}{100} 	imes 100 = 120$$

Question 3

If the unemployment rate is calculated as $$\displaystyle \frac{	ext{unemployed}}{	ext{labor force}} 	imes 100$$, what is the unemployment rate if there are 2 million unemployed and 20 million in the labor force?

Accepted Answer

$$\displaystyle \frac{2}{20} 	imes 100 = 10\%$$

Question 4

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

Accepted Answer

Input costs fall

Question 5

A U.S. company produces cars in Japan. Which of the following is TRUE regarding GDP and GNP?

Accepted Answer

The production counts toward Japan's GDP and U.S. GNP

Question 6

If aggregate expenditure (AE) is less than GDP, what is likely to happen in the economy?

Accepted Answer

Unplanned inventories rise, production falls, GDP and jobs go down

Question 7

Which of the following would NOT cause the aggregate demand (AD) curve to shift to the right?

Accepted Answer

Decrease in net exports due to a global recession

Question 8

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

Accepted Answer

Unemployment rises as labor supply exceeds labor demand

Question 9

Which type of unemployment is caused by a recession?

Accepted Answer

Cyclical unemployment

Question 10

If the inflation rate is calculated as $$\displaystyle \frac{CPI_{	ext{new}} - CPI_{	ext{old}}}{CPI_{	ext{old}}} 	imes 100$$, what is the inflation rate if $$CPI_{	ext{new}} = 120$$ and $$CPI_{	ext{old}} = 100$$?

Accepted Answer

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

Question 11

Which of the following is a limitation of GDP as a measure of economic well-being?

Accepted Answer

It does not account for environmental quality or leisure time

Question 12

If the equilibrium on the AD-AS graph is to the left of the long-run aggregate supply (LRAS), what does this indicate?

Accepted Answer

There is a recession gap with high unemployment

Question 13

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

Accepted Answer

Wages rise

Question 14

If U.S. inflation is lower than other countries, what is the likely effect on U.S. net exports?

Accepted Answer

U.S. goods become cheaper, exports increase

Question 15

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

Accepted Answer

Nominal GDP uses current prices; real GDP uses base year prices to remove inflation

Question 16

Which of the following would cause a movement UP along the aggregate demand (AD) curve?

Accepted Answer

Increase in the price level (inflation)

Question 17

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

Accepted Answer

Purchasing power increases

Question 18

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job

Question 19

What is the formula for GDP using the expenditure approach?

Accepted Answer

$$\displaystyle GDP = C + I + G + NX$$

Question 20

If technology improves in the economy, what is the likely effect on the short-run aggregate supply (SRAS) curve?

Accepted Answer

SRAS shifts right

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

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