Q: A country had a real GDP of $51$ billion in year 1 and $55$ billion in year 2. What was the growth rate of real GDP from year 1 to year 2?

$\frac{55-51}{51} \times 100 = 7.84\%$

Q: Using the same data (Population = 100 million, Labor force = 73 million), what is the labor force participation rate?

$\frac{73}{100} \times 100 = 73\%$

Q: Given: Unemployed = 8 million, Labor force = 73 million. What is the unemployment rate?

$\frac{8}{73} \times 100 \approx 10.96\%$

Q: If the price index moves from $110$ to $113$, what is the rate of inflation?

$\frac{113-110}{110} \times 100 = 2.73\%$

Question 1

In the context of a production possibilities frontier (PPF), which point represents a recession?

Accepted Answer

A point inside the PPF curve

Question 2

Which of the following points on a PPF is unattainable without trade or economic growth?

Accepted Answer

A point outside the PPF curve

Question 3

If there is a large increase in demand for butter in a country, where would production likely occur on the PPF?

Accepted Answer

Closer to the axis representing butter

Question 4

What action would a firm most likely take to increase the quantity of goods demanded?

Accepted Answer

Lower the price of the good

Question 5

Which of the following is included in the calculation of a country's GDP?

Accepted Answer

A haircut service purchased at Great Clips

Question 6

A country had a real GDP of $51$ billion in year 1 and $55$ billion in year 2. What was the growth rate of real GDP from year 1 to year 2?

Accepted Answer

$\frac{55-51}{51} 	imes 100 = 7.84\%$

Question 7

Given: Population = 100 million, Unemployed = 8 million, Employed = 65 million. What is the labor force?

Accepted Answer

$8 + 65 = 73$ million

Question 8

Using the same data (Population = 100 million, Labor force = 73 million), what is the labor force participation rate?

Accepted Answer

$\frac{73}{100} 	imes 100 = 73\%$

Question 9

Given: Unemployed = 8 million, Labor force = 73 million. What is the unemployment rate?

Accepted Answer

$\frac{8}{73} 	imes 100 \approx 10.96\%$

Question 10

When a wage or transfer payment is adjusted automatically to account for inflation, what is this process called?

Accepted Answer

Indexation

Question 11

If the price index moves from $110$ to $113$, what is the rate of inflation?

Accepted Answer

$\frac{113-110}{110} 	imes 100 = 2.73\%$

Question 12

Who is generally hurt by unexpected inflation?

Accepted Answer

Lenders

Question 13

Who is generally hurt by deflation?

Accepted Answer

Borrowers

Question 14

In the Classical AD/AS Model shown, if the economy is at point Y1, what does this indicate?

Accepted Answer

The economy is in a recession

Question 15

In the AD/AS model, which line represents potential GDP?

Accepted Answer

The vertical LRAS line

Question 16

Suppose a country experiences a negative demand shock, shifting the AD curve left. What is the likely short-run effect on output and price level?

Accepted Answer

Output decreases, price level decreases

Question 17

If a country wants to move from a point inside its PPF to a point on the PPF, what must occur?

Accepted Answer

Increase in resource utilization or efficiency

Question 18

A country produces only two goods: guns and butter. If the opportunity cost of producing more butter increases as more butter is produced, what does this imply about the PPF?

Accepted Answer

The PPF is bowed outward

Question 19

If nominal GDP increases but real GDP remains constant, what must be true?

Accepted Answer

The price level has increased

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