$Real\ GDP = \frac{Nominal\ GDP}{GDP\ Deflator} \times 100 = \frac{20,000}{125} \times 100 = 16,000$

$\frac{210 - 200}{200} \times 100 = 5\%$

Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The highest-valued alternative that must be given up to engage in an activity.

Question 2

Suppose a country produces only two goods: cars and computers. If the country increases production of cars, what is the opportunity cost?

Accepted Answer

The number of computers that must be given up.

Question 3

Which equation correctly represents the expenditure approach to calculating GDP?

Accepted Answer

$GDP = C + I + G + NX$

Question 4

If nominal GDP in 2022 is $\$20,000$ and the GDP deflator is $125$, what is real GDP?

Accepted Answer

$Real\ GDP = \frac{Nominal\ GDP}{GDP\ Deflator} 	imes 100 = \frac{20,000}{125} 	imes 100 = 16,000$

Question 5

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

Accepted Answer

The value of a used car sold from one consumer to another.

Question 6

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 7

If the price of a product increases, what happens to the quantity demanded, according to the law of demand (ceteris paribus)?

Accepted Answer

Quantity demanded decreases.

Question 8

Which of the following would cause the demand curve for smartphones to shift to the right?

Accepted Answer

An increase in consumer income (assuming smartphones are normal goods).

Question 9

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job.

Question 10

If the Consumer Price Index (CPI) increases from 200 to 210 over one year, what is the annual inflation rate?

Accepted Answer

$\frac{210 - 200}{200} 	imes 100 = 5\%$

Question 11

Which of the following best describes allocative efficiency?

Accepted Answer

Producing the mix of goods most desired by society.

Question 12

Suppose the government increases spending on infrastructure. Which component of GDP does this directly affect?

Accepted Answer

Government purchases ($G$)

Question 13

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

Accepted Answer

GDP does not account for environmental degradation.

Question 14

If the labor force is 150 million and the number of unemployed workers is 7.5 million, what is the unemployment rate?

Accepted Answer

$\frac{7.5}{150} 	imes 100 = 5\%$

Question 15

Which of the following would cause a leftward shift in the supply curve for wheat?

Accepted Answer

An increase in the price of fertilizer (an input).

Question 16

Which of the following is an example of structural unemployment?

Accepted Answer

A coal miner loses their job because the economy is shifting to renewable energy.

Question 17

If a market experiences a shortage, what will likely happen to the price and quantity in the short run?

Accepted Answer

Price will rise and quantity supplied will increase.

Question 18

Which of the following best describes positive economic analysis?

Accepted Answer

Analysis that describes what is, based on facts and data.

Question 19

Suppose the government imposes a tax on producers of gasoline. What is the most likely immediate effect on the supply curve for gasoline?

Accepted Answer

The supply curve shifts to the left.

Question 20

Which of the following is an example of cyclical unemployment?

Accepted Answer

A factory worker is laid off during a recession.

Macroeconomics Foundations: Key Concepts, Models, and Applications

Study Guide - Practice Questions