Q: The unemployment rate is calculated as:

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

Question 1

Which of the following best describes Gross Domestic Product (GDP)?

Accepted Answer

The total value of all final goods and services produced within a country's borders in a given period.

Question 2

In the circular flow model, which of the following correctly matches a flow with its direction?

Accepted Answer

Households supply factors of production to firms in exchange for income.

Question 3

Suppose a country has gross investment of $$500 billion and depreciation of 120 $$billion. What is its net investment?

Accepted Answer

$$380$$ billion

Question 4

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

Accepted Answer

Purchases of intermediate goods by firms

Question 5

Nominal GDP in 2022 was $$2,000$$ and the GDP deflator was $$1.25. $$What was real GDP in 2022?

Accepted Answer

$$1,600$$

Question 6

Which of the following best explains the purpose of using real GDP instead of nominal GDP?

Accepted Answer

To remove the effects of price changes and measure actual changes in output over time.

Question 7

The Lucas Wedge is best described as:

Accepted Answer

The cumulative loss of output due to actual GDP growing slower than potential GDP.

Question 8

Which of the following is a limitation of real GDP as a measure of standard of living?

Accepted Answer

It does not account for the value of household production.

Question 9

Which of the following is NOT a component of the labor force?

Accepted Answer

A full-time student not seeking employment

Question 10

A person is considered unemployed if they:

Accepted Answer

Are available for work and have actively looked for a job in the past four weeks.

Question 11

The unemployment rate is calculated as:

Accepted Answer

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

Question 12

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker loses their job because their skills are no longer needed due to automation.

Question 13

If the natural unemployment rate is $$5\%$$ and the actual unemployment rate is $$8\%$$, what is the output gap?

Accepted Answer

Negative, indicating the economy is producing below potential GDP.

Question 14

Which of the following best describes the Consumer Price Index (CPI)?

Accepted Answer

A measure of the average price level of a fixed basket of goods and services purchased by households.

Question 15

Suppose the CPI was $$120$$ last year and $$126$$ this year. What is the inflation rate?

Accepted Answer

$$5\%$$

Question 16

Which of the following is a source of bias in the CPI?

Accepted Answer

Substitution bias, because consumers may switch to cheaper alternatives not reflected in the fixed basket.

Question 17

Which of the following is NOT a problem caused by inflation?

Accepted Answer

Increased accuracy of price signals

Question 18

If nominal wages increase by $$3\%$$ and the inflation rate is $$2\%$$, what is the real wage increase?

Accepted Answer

$$1\%$$

Question 19

Which of the following is an alternative price index to the CPI?

Accepted Answer

GDP deflator

Question 20

A country has a working-age population of $$200$$ million, a labor force of $$150$$ million, and $$15$$ million unemployed. What is the labor force participation rate?

Accepted Answer

$$75\%$$

Ch. 4 & 5: GDP, Unemployment, and Inflation

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