Question 1

Suppose the nominal GDP of a country in 2022 is $\$1,200$ billion, and the GDP deflator for 2022 is $120$. What is the real GDP for 2022?

Accepted Answer

$\$1,000$ billion

Question 2

If the Consumer Price Index (CPI) increases from $150$ to $165$ over one year, what is the annual inflation rate?

Accepted Answer

$8.5\%$

Question 3

Which of the following best explains why the unemployment rate can never be zero, even in a healthy economy?

Accepted Answer

There is always some frictional and structural unemployment.

Question 4

If the Canadian dollar (CAD) appreciates against the US dollar (USD), what is the most likely effect on Canadian exports to the US?

Accepted Answer

Canadian exports become more expensive for US buyers, so exports decrease.

Question 5

Which of the following is a limitation of using the CPI to measure inflation?

Accepted Answer

It does not account for substitution bias when consumers change their purchasing habits.

Question 6

If the marginal propensity to consume (MPC) is $0.8$, what is the value of the simple spending multiplier?

Accepted Answer

$5$

Question 7

Suppose the government increases its spending by $\$100$ million. If the MPC is $0.75$, what is the total increase in GDP according to the simple multiplier model?

Accepted Answer

$\$400$ million

Question 8

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

Accepted Answer

An increase in consumer confidence leading to higher spending.

Question 9

If the economy is experiencing high inflation and low unemployment, which phase of the business cycle is it most likely in?

Accepted Answer

Expansion

Question 10

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

Accepted Answer

Nominal GDP is measured using current prices, while real GDP is adjusted for inflation.

Question 11

If the unemployment rate is $6\%$ and the natural rate of unemployment is $4\%$, what is the cyclical unemployment rate?

Accepted Answer

$2\%$

Question 12

Which of the following scenarios best illustrates structural unemployment?

Accepted Answer

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

Question 13

If the government wants to reduce inflation without increasing unemployment, which policy mix is most appropriate?

Accepted Answer

Supply-side policies that increase productivity.

Question 14

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job.

Question 15

If the price of oil rises sharply, causing production costs to increase across the economy, what is the most likely short-run effect on the aggregate supply (AS) curve?

Accepted Answer

The AS curve shifts to the left.

Question 16

Which of the following best explains why the GDP deflator can give a different inflation rate than the CPI?

Accepted Answer

The GDP deflator includes all domestically produced goods and services, while the CPI only includes a fixed basket of consumer goods.

Question 17

If the government increases taxes and decreases spending at the same time, what is the likely effect on aggregate demand?

Accepted Answer

Aggregate demand will decrease.

Question 18

Which of the following is most likely to cause demand-pull inflation?

Accepted Answer

A rapid increase in consumer spending due to rising incomes.

Question 19

If the central bank wants to reduce inflation, which of the following actions is most appropriate?

Accepted Answer

Increase the policy interest rate.

Question 20

Suppose the economy is at full employment and the government increases its spending. What is the most likely long-run effect if the increase is not matched by higher productivity?

Accepted Answer

Higher inflation with little or no increase in real output.

Macroeconomics Final Exam Study Notes: GDP, Inflation, Unemployment, and Policy

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