Q: If the price level last year was 150 and the price level this year was 125, the inflation rate between last year and this year was ______.

$\frac{150-125}{150} \times 100 = 16.6\%$

Q: If the CPI basket of goods cost $200 in the reference base period and $450 in a later year, the CPI in the later year equals ______.

$\frac{450}{200} \times 100 = 225$

Question 1

When the population increases with no change in labor productivity, employment ______ and potential GDP ______.

Accepted Answer

increases; increases

Question 2

Refer to the aggregate demand diagram. If the economy is at point a, an increase in real GDP will move the economy to ______.

Accepted Answer

expected future income; point d

Question 3

Price indexes can overstate inflation because they ______.

Accepted Answer

do not contain the prices of new goods and do not contain the prices of very foreign goods

Question 4

From 1961 to 2005, the labor force participation rate of women in the United States ______ at a rate ______ than the labor force participation rate of men.

Accepted Answer

increased; faster

Question 5

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the money wage rate ______, unemployment ______, and the price level ______.

Accepted Answer

falls; employment rises; rises

Question 6

Suppose a country that is open to trade decides to close its borders to free trade. As a result, a number of its workers must shift their jobs into international competition and can't find new employment because their skills don't match the jobs now required for exporting. The workers who lost their jobs would best be classified as experiencing ______.

Accepted Answer

structural unemployment

Question 7

If the price level last year was 150 and the price level this year was 125, the inflation rate between last year and this year was ______.

Accepted Answer

$\frac{150-125}{150} 	imes 100 = 16.6\%$

Question 8

In the short-run macroeconomic equilibrium, ______.

Accepted Answer

real GDP is less than potential GDP

Question 9

If the economy enters a recession, ______.

Accepted Answer

cyclical unemployment increases

Question 10

If taxes increase, there is ______.

Accepted Answer

a shift to AD$_2$

Question 11

According to the wealth effect, an increase in the price level ______ real wealth and ______ aggregate expenditure.

Accepted Answer

decreases; decreases

Question 12

Technological progress that increases the expected profit rate shifts the demand for loanable funds curve ______.

Accepted Answer

rightward and increases the real interest rate

Question 13

If the CPI basket of goods cost $200 in the reference base period and $450 in a later year, the CPI in the later year equals ______.

Accepted Answer

$\frac{450}{200} 	imes 100 = 225$

Question 14

An increase in the expected profit rate will result in a movement from point E to ______.

Accepted Answer

point F

Question 15

A decrease in the real interest rate will result in a movement from point F to ______.

Accepted Answer

point G

Question 16

The above table shows answers given by people interviewed in a government survey of households. Which individuals are considered unemployed?

Accepted Answer

B, C, and D

Question 17

The relationship between how real GDP varies as the quantity of labor employed varies, other things remaining the same, is shown by the ______.

Accepted Answer

production function

Question 18

If the prevailing real wage rate, the quantity of labor supplied exceeds the quantity demanded, the real wage rate will be ______ the equilibrium real wage rate.

Accepted Answer

greater than

Question 19

The long-run aggregate supply curve is ______ because as its prices rise, the money wage rate and other input prices rise by the same amount.

Accepted Answer

vertical

Macroeconomics Multiple Choice Review: Aggregate Supply, Demand, Inflation, and Labor Markets

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