Q: Which of the following equations correctly defines the unemployment rate?

$$\text{Unemployment Rate} = \frac{\text{Unemployed}}{\text{Labor Force}} \times 100$$

Q: If the Consumer Price Index (CPI) was 200 in the base year and 250 in the current year, what is the inflation rate?

$$\frac{250 - 200}{200} \times 100 = 25\%$$

Question 1

Which of the following is the best measure of a country's standard of living over time?

Accepted Answer

Real GDP per capita

Question 2

Suppose the real GDP per capita in a country grows at an annual rate of 2%. According to the Rule of 70, approximately how many years will it take for the standard of living to double?

Accepted Answer

$$70 \div 2 = 35$$ years

Question 3

Which of the following is the most important factor in increasing labor productivity and, therefore, real GDP per capita in the long run?

Accepted Answer

Increasing the level of technology

Question 4

If total spending (aggregate expenditure) is less than total production (real GDP) in a given year, what will happen to inventories and production?

Accepted Answer

Inventories will increase, leading to a decrease in production

Question 5

Which of the following equations correctly defines the unemployment rate?

Accepted Answer

$$	ext{Unemployment Rate} = \frac{	ext{Unemployed}}{	ext{Labor Force}} 	imes 100$$

Question 6

Which type of unemployment is caused by a mismatch between the skills of workers and the requirements of jobs due to technological change?

Accepted Answer

Structural unemployment

Question 7

If the marginal propensity to consume (MPC) is 0.8, what is the value of the multiplier?

Accepted Answer

$$\frac{1}{1-0.8} = 5$$

Question 8

Which of the following best describes the effect of an increase in the exchange rate value of the dollar on U.S. net exports?

Accepted Answer

It increases the cost of U.S. exports and decreases the cost of U.S. imports, reducing net exports.

Question 9

A country’s nominal GDP increased from $$1 trillion to 1.1 $$trillion, while its real GDP increased from $$1 trillion to 1.05 $$trillion. What does this indicate?

Accepted Answer

Prices increased during the period (inflation occurred).

Question 10

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

Accepted Answer

The value of babysitting paid in cash and not reported to the government

Question 11

If the Consumer Price Index (CPI) was 200 in the base year and 250 in the current year, what is the inflation rate?

Accepted Answer

$$\frac{250 - 200}{200} 	imes 100 = 25\%$$

Question 12

Which of the following is a problem caused by unanticipated inflation?

Accepted Answer

It redistributes income between lenders and borrowers.

Question 13

Suppose the nominal interest rate on a loan is 8% and the inflation rate is 5%. What is the real interest rate?

Accepted Answer

$$8\% - 5\% = 3\%$$

Question 14

Which of the following would cause the aggregate expenditure (AE) line to shift upward in the short-run AE model?

Accepted Answer

An increase in expected future income

Question 15

If the U.S. economy is at the natural rate of unemployment, which of the following is true?

Accepted Answer

There is no cyclical unemployment.

Question 16

Which of the following best explains why the official unemployment rate may understate the true level of unemployment?

Accepted Answer

It does not include discouraged workers who have stopped looking for work.

Question 17

If the marginal propensity to consume (MPC) is 0.6 and autonomous expenditure increases by $100 billion, what is the change in equilibrium real GDP?

Accepted Answer

$$100 	imes \frac{1}{1-0.6} = 250$$ billion

Question 18

Which of the following is a reason why GDP is not a perfect measure of economic well-being?

Accepted Answer

It does not account for the value of leisure time.

Question 19

Which of the following would be considered an example of cyclical unemployment?

Accepted Answer

A factory worker laid off during a recession

Macroeconomics Study Guide: Economic Growth, Unemployment, Inflation, and Aggregate Expenditure

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