Q: If the Consumer Price Index (CPI) was $$120 in 2020 $$and $$132 in 2021$$, what was the inflation rate between these years?

$$\frac{132 - 120}{120} \times 100 = 10\%$$

Q: If the labor force is $$150$$ million and $$15$$ million people are unemployed, what is the unemployment rate?

$$\frac{15}{150} \times 100 = 10\%$$

Question 1

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

Accepted Answer

The value of the next best alternative forgone when making a choice.

Question 2

Suppose a country can produce either 100 units of food or 50 units of clothing using all its resources. What is the opportunity cost of producing one unit of clothing?

Accepted Answer

$$2$$ units of food

Question 3

Which of the following would NOT be included in the calculation of a country's Gross Domestic Product (GDP)?

Accepted Answer

The sale of used furniture at a garage sale.

Question 4

If the Consumer Price Index (CPI) was $$120 in 2020 $$and $$132 in 2021$$, what was the inflation rate between these years?

Accepted Answer

$$\frac{132 - 120}{120} 	imes 100 = 10\%$$

Question 5

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker replaced by automation.

Question 6

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

Accepted Answer

$$\16$$,000$

Question 7

A price ceiling set below the equilibrium price in a competitive market will most likely result in:

Accepted Answer

A shortage of the good.

Question 8

Which of the following best explains why the Production Possibilities Frontier (PPF) is typically bowed outward?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 9

If the labor force is $$150$$ million and $$15$$ million people are unemployed, what is the unemployment rate?

Accepted Answer

$$\frac{15}{150} 	imes 100 = 10\%$$

Question 10

Which of the following would cause a rightward shift in the demand curve for electric cars?

Accepted Answer

An increase in consumer income, assuming electric cars are normal goods.

Question 11

If the government imposes a minimum wage above the equilibrium wage, what is the most likely outcome in the labor market?

Accepted Answer

A surplus of labor (unemployment).

Question 12

Which of the following is a normative economic statement?

Accepted Answer

The government should increase spending to reduce unemployment.

Question 13

Suppose the CPI in 2010 is $$100$$ and in 2020 is $$150. If a $$worker earned $$\40$$,000$ in 2010, what is the equivalent salary in 2020 dollars?

Accepted Answer

$$\60$$,000$

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 supply of a good increases while demand remains constant, what will happen to equilibrium price and quantity?

Accepted Answer

Price decreases, quantity increases.

Question 16

Which of the following is NOT a component of GDP?

Accepted Answer

Transfer payments

Question 17

If a country has an absolute advantage in producing both wheat and cars, but a comparative advantage in producing wheat, what should it do according to the theory of comparative advantage?

Accepted Answer

Produce only wheat and import cars.

Question 18

Which of the following is a problem with using GDP as a measure of well-being?

Accepted Answer

GDP does not include the value of leisure time.

Question 19

If the working-age population is $$200$$ million, the labor force is $$140$$ million, and $$10$$ million are unemployed, what is the labor force participation rate?

Accepted Answer

$$\frac{140}{200} 	imes 100 = 70\%$$

Question 20

Which of the following best describes the circular flow diagram in macroeconomics?

Accepted Answer

It shows how money and goods flow between households and firms.

Macroeconomics Midterm Study Guide: Core Concepts and Applications

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