Question 1

Suppose the nominal GDP of a country in 2022 is $$5,000$$ billion and the real GDP is $$4,000$$ billion. What is the GDP deflator for 2022?

Accepted Answer

$$\125$

Question 2

Which of the following would NOT be included in the calculation of a country's GDP for the current year?

Accepted Answer

The purchase of a used car from a neighbor

Question 3

If the cost of a basket of goods in the base year is $$\200$ and in the current year is $$\$$250$$, what is the Consumer Price Index (CPI) for the current year?

Accepted Answer

$$125$$

Question 4

Which of the following best describes the difference between GDP and GNP?

Accepted Answer

GDP measures output produced within a country's borders, while GNP measures output produced by a country's citizens regardless of location.

Question 5

A country has a labor force of 50 million people, of which 47 million are employed. What is the unemployment rate?

Accepted Answer

$$6\%$$

Question 6

Which of the following scenarios would cause a movement along the demand curve for coffee, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of coffee

Question 7

If the inflation rate last year was $$2\%$$ and this year it is $$5\%$$, what is the percentage change in the inflation rate (i.e., the inflation rate of inflation)?

Accepted Answer

$$150\%$$

Question 8

Which of the following is an example of structural unemployment?

Accepted Answer

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

Question 9

If nominal GDP increases by $$10\%$$ and the GDP deflator increases by $$4\%$$, what is the approximate percentage increase in real GDP?

Accepted Answer

$$6\%$$

Question 10

Which of the following best explains the discouraged worker effect?

Accepted Answer

Some unemployed individuals stop looking for work, causing the unemployment rate to fall even though fewer people are working.

Question 11

Suppose the nominal interest rate on a savings account is $$8\%$$ and the inflation rate is $$3\%. $$What is the real interest rate?

Accepted Answer

$$5\%$$

Question 12

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

Accepted Answer

GDP does not account for the value of household production or the distribution of income.

Question 13

If the labor force participation rate in a country is $$60\%$$ and the total population aged 16 and over is 100 million, what is the size of the labor force?

Accepted Answer

60 million

Question 14

Which of the following would cause a shift of the supply curve for wheat to the right?

Accepted Answer

A technological improvement in wheat farming

Question 15

According to Keynes, what is the primary reason for persistent unemployment during a recession?

Accepted Answer

Insufficient aggregate demand

Question 16

If the cost of a basket of goods was $$\300$ in 2020 and $$\$$330 in 2021$$, what was the inflation rate between 2020 and 2021?

Accepted Answer

$$10\%$$

Question 17

Which of the following best describes the relationship between potential GDP and real GDP during a recession?

Accepted Answer

Potential GDP is greater than real GDP, resulting in positive cyclical unemployment.

Question 18

Which of the following is true about the difference between the GDP deflator and the Consumer Price Index (CPI)?

Accepted Answer

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

Question 19

If a country’s real GDP grows by $$3\%$$ and its population grows by $$2\%$$, what is the per-capita real GDP growth rate?

Accepted Answer

$$1\%$$

Question 20

Which of the following is an example of a cost associated with unanticipated inflation?

Accepted Answer

Menu costs incurred by firms as they change prices frequently

Macroeconomics Midterm 1 Study Guide: Key Concepts and Formulas

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