Question 1

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

Accepted Answer

The value of the next best alternative foregone when a choice is made.

Question 2

Suppose a country can produce either 10 units of food or 20 units of clothing with all its resources. What is the opportunity cost of producing 1 unit of food?

Accepted Answer

2 units of clothing

Question 3

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 4

If the government sets a price ceiling below the equilibrium price for bread, what is the most likely outcome?

Accepted Answer

A shortage of bread

Question 5

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

Accepted Answer

The sale of used furniture at a garage sale

Question 6

Given the following data for a country in 2023: Consumption = $$500B, Investment = 200B$$, Government Spending = $$300B, Exports = 100B$$, Imports = $150B. What is the GDP?

Accepted Answer

$950B

Question 7

If nominal GDP in 2022 is $$\2$$,000$$ and the GDP deflator is 125$, what is real GDP in 2022?

Accepted Answer

$$\1$$,600$

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

Suppose the CPI in 2020 is 120 and in 2021 is 126. What is the inflation rate between 2020 and 2021?

Accepted Answer

$$5\%$$

Question 10

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate is searching for her first job.

Question 11

If the labor force is 200 million and 180 million are employed, what is the unemployment rate?

Accepted Answer

$$10\%$$

Question 12

Which of the following would NOT cause a shift in the supply curve for smartphones?

Accepted Answer

A change in consumer preferences for smartphones

Question 13

If the nominal interest rate is $$8\%$$ and the inflation rate is $$3\%$$, what is the real interest rate?

Accepted Answer

$$5\%$$

Question 14

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

Accepted Answer

GDP does not account for the distribution of income.

Question 15

A country can produce 100 units of wheat or 200 units of corn. Another country can produce 80 units of wheat or 160 units of corn. Which country has the comparative advantage in wheat?

Accepted Answer

Both countries have the same opportunity cost, so neither has a comparative advantage

Question 16

If the government increases unemployment benefits, what is the likely effect on the natural rate of unemployment?

Accepted Answer

It will increase because people may take longer to find jobs.

Question 17

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

Accepted Answer

Nominal GDP is measured in current prices; real GDP is measured in base year prices.

Question 18

If a country is operating inside its production possibilities frontier (PPF), what does this indicate?

Accepted Answer

The country is not using all its resources efficiently.

Question 19

Which of the following is an example of structural unemployment?

Accepted Answer

A worker loses his job because his skills are no longer in demand due to technological change.

Question 20

Suppose the price of a substitute good increases. What is the likely effect on the demand for the original good?

Accepted Answer

Demand for the original good will increase.

Macroeconomics Midterm Study Guide: Key Concepts and Applications

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