Question 1

Suppose the price of coffee increases due to a poor harvest in Brazil. According to the law of supply and demand, what is the most likely immediate effect in the coffee market?

Accepted Answer

The supply curve shifts to the left, increasing equilibrium price and decreasing equilibrium quantity.

Question 2

Which of the following best describes the difference between a change in demand and a change in quantity demanded?

Accepted Answer

A change in quantity demanded is a movement along the demand curve due to a price change, while a change in demand is a shift of the demand curve due to factors like income or preferences.

Question 3

If a country can produce either 10 units of wheat or 20 units of rice with the same resources, what is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$$2$$ units of rice

Question 4

Which of the following is NOT included in the calculation of a country's Gross Domestic Product (GDP)?

Accepted Answer

The value of used cars sold in the country

Question 5

Suppose the nominal GDP of a country in 2022 is $$\1$$,200$$ billion and the GDP deflator is 120$. What is the real GDP for 2022?

Accepted Answer

$$\1$$,000$ billion

Question 6

According to the law of comparative advantage, which of the following statements is true?

Accepted Answer

A country should specialize in producing goods for which it has the lowest opportunity cost.

Question 7

If the Consumer Price Index (CPI) increases from $$200 to$$ $$210$$ over a year, what is the annual inflation rate?

Accepted Answer

$$5\%$$

Question 8

Which of the following best describes allocative efficiency in a market?

Accepted Answer

Resources are used in a way that maximizes total surplus, producing the mix of goods most desired by society.

Question 9

If both demand and supply increase simultaneously in a market, what can we say about the new equilibrium price and quantity?

Accepted Answer

Equilibrium quantity will rise, but the effect on equilibrium price is indeterminate without more information.

Question 10

Which of the following is a potential bias in the measurement of the Consumer Price Index (CPI)?

Accepted Answer

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

Question 11

Suppose the nominal interest rate is $$8\%$$ and the expected inflation rate is $$3\%. $$According to the Fisher equation, what is the real interest rate?

Accepted Answer

$$5\%$$

Question 12

Which of the following best explains why the natural rate of unemployment may differ between countries?

Accepted Answer

Differences in labor market policies and institutions.

Question 13

If the yield curve in the bond market becomes inverted, what does this typically signal about the economy?

Accepted Answer

A likely recession in the near future.

Question 14

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 15

If a country’s production possibility curve (PPC) shifts outward, which of the following is the most likely cause?

Accepted Answer

An improvement in technology or an increase in resources.

Question 16

Which of the following best describes the relationship between bond prices and interest rates?

Accepted Answer

Bond prices and interest rates move in opposite directions.

Question 17

If the labor force participation rate (LFPR) is $$60\%$$ and the working-age population is $$200$$ million, what is the size of the labor force?

Accepted Answer

$$120$$ million

Question 18

Which of the following is a key insight from Adam Smith’s 'invisible hand' concept?

Accepted Answer

Individuals pursuing their own self-interest can lead to positive outcomes for society as a whole.

Question 19

If a country’s GDP per capita increases but its population grows faster than GDP, what happens to the standard of living?

Accepted Answer

The standard of living decreases.

Question 20

Which of the following best describes the circular flow diagram in macroeconomics?

Accepted Answer

It shows the flow of goods and services between firms and households, and the flow of money in the opposite direction.

Macroeconomics Midterm Study Guide: Key Concepts for Midterm

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