Q: Suppose the price of food, movies, and clothing in 2021 are $$16$$, $$15$$, and $$26$$ respectively. The quantities are $$60$$ units of food, $$40$$ units of movies, and $$90$$ units of clothing. What is the cost of the basket in 2021?

$$16 \times 60 + 15 \times 40 + 26 \times 90 = 960 + 600 + 2340 = 3900$$

Q: If the cost of the basket in the base year (2021) is $$3900$$ and in 2022 is $$60 \times 15 + 40 \times 16 + 90 \times 29 = 900 + 640 + 2610 = 4150$$, what is the Consumer Price Index (CPI) for 2022?

$$\frac{4150}{3900} \times 100 = 106.41$$

Q: If the CPI in 2021 is $$100$$ and in 2022 is $$106.41$$, what is the annual inflation rate from 2021 to 2022?

$$\frac{106.41 - 100}{100} \times 100 = 6.41\%$$

Q: In 2023, a country has a labor force of $$16,108$$ thousand, employment of $$14,946.2$$ thousand, and a working-age population of $$24,443.3$$ thousand. What is the labor force participation rate?

$$\frac{16,108}{24,443.3} \times 100 = 65.9\%$$

Q: Using the same data as above, what is the unemployment rate in 2023?

$$\frac{16,108 - 14,946.2}{16,108} \times 100 = 7.2\%$$

Q: If the working-age population increases by $$353.0$$ thousand, employment increases by $$364.2$$ thousand, and the labor force increases by $$469.5$$ thousand in 2024, what is the new labor force participation rate? (Use previous working-age population $$24,443.3$$ thousand and labor force $$16,108$$ thousand.)

$$\frac{16,108 + 469.5}{24,443.3 + 353.0} \times 100 = 66.7\%$$

Q: If the labor force in 2024 is $$16,577.5$$ thousand and employment is $$15,310.4$$ thousand, what is the unemployment rate in 2024?

$$\frac{16,577.5 - 15,310.4}{16,577.5} \times 100 = 7.6\%$$

Question 1

Suppose an economy has the following data (in billions): Consumption = $$398$$, Investment = $$49$$, Government Purchases = $$134$$, Exports = $$179$$, Imports = $$170. $$Using the expenditure approach, what is the value of GDP?

Accepted Answer

$$398 + 49 + 134 + 179 - 170 = 590$$

Question 2

Given the following data for a country: GDP = $$739$$, Capital Consumption Allowance = $$79$$, Indirect Taxes (less subsidies) = $$76. $$What is the Net Domestic Product (NDP)?

Accepted Answer

$$739 - 79 = 660$$

Question 3

If the Net Domestic Product (NDP) is $$660$$ and Net Foreign Factor Income is $$-2$$, what is the value of Net National Product (NNP)?

Accepted Answer

$$660 + (-2) = 658$$

Question 4

Given the following data: Nominal GDP in 2022 is $$560$$, GDP deflator in 2022 is $$105. $$What is the real GDP for 2022?

Accepted Answer

$$\frac{560}{1.05} = 533.33$$

Question 5

If the GDP deflator in 2020 is $$72$$ and nominal GDP is $$500$$, what is the real GDP for 2020?

Accepted Answer

Question 6

Suppose the price of food, movies, and clothing in 2021 are $$16$$, $$15$$, and $$26$$ respectively. The quantities are $$60$$ units of food, $$40$$ units of movies, and $$90$$ units of clothing. What is the cost of the basket in 2021?

Accepted Answer

$$16 	imes 60 + 15 	imes 40 + 26 	imes 90 = 960 + 600 + 2340 = 3900$$

Question 7

If the cost of the basket in the base year (2021) is $$3900$$ and in 2022 is $$60 	imes 15 + 40 	imes 16 + 90 	imes 29 = 900 + 640 + 2610 = 4150$$, what is the Consumer Price Index (CPI) for 2022?

Accepted Answer

$$\frac{4150}{3900} 	imes 100 = 106.41$$

Question 8

If the CPI in 2021 is $$100$$ and in 2022 is $$106.41$$, what is the annual inflation rate from 2021 to 2022?

Accepted Answer

$$\frac{106.41 - 100}{100} 	imes 100 = 6.41\%$$

Question 9

A loan of $$1000 is $$repaid after one year with a nominal interest rate of $$5\%. If $$the inflation rate during the year is $$2\%$$, what is the real interest rate?

Accepted Answer

$$5\% - 2\% = 3\%$$

Question 10

If the real interest rate is $$3\%$$ and the inflation rate is $$2\%$$, what is the nominal interest rate?

Accepted Answer

$$3\% + 2\% = 5\%$$

Question 11

If the inflation rate is higher than expected, who benefits from a fixed-rate loan agreement?

Accepted Answer

The borrower benefits because the real value of repayments is lower.

Question 12

In 2023, a country has a labor force of $$16,108$$ thousand, employment of $$14,946.2$$ thousand, and a working-age population of $$24,443.3$$ thousand. What is the labor force participation rate?

Accepted Answer

$$\frac{16,108}{24,443.3} 	imes 100 = 65.9\%$$

Question 13

Using the same data as above, what is the unemployment rate in 2023?

Accepted Answer

$$\frac{16,108 - 14,946.2}{16,108} 	imes 100 = 7.2\%$$

Question 14

If the working-age population increases by $$353.0$$ thousand, employment increases by $$364.2$$ thousand, and the labor force increases by $$469.5$$ thousand in 2024, what is the new labor force participation rate? (Use previous working-age population $$24,443.3$$ thousand and labor force $$16,108$$ thousand.)

Accepted Answer

$$\frac{16,108 + 469.5}{24,443.3 + 353.0} 	imes 100 = 66.7\%$$

Question 15

If the labor force in 2024 is $$16,577.5$$ thousand and employment is $$15,310.4$$ thousand, what is the unemployment rate in 2024?

Accepted Answer

$$\frac{16,577.5 - 15,310.4}{16,577.5} 	imes 100 = 7.6\%$$

Question 16

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

Accepted Answer

Nominal GDP is measured using current prices, while real GDP is measured using constant base-year prices.

Question 17

If the GDP deflator increases from $$100 to$$ $$108$$ over one year, what does this indicate?

Accepted Answer

The average price level in the economy increased by $$8\%$$ over the year.

Question 18

Which of the following is NOT included in the calculation of GDP using the expenditure approach?

Accepted Answer

Personal savings

Macroeconomics Study Guide: GDP, Price Indices, Interest Rates, and Unemployment Measures

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