Q: Suppose the working-age population of a country is 10,000. If 6,000 people are employed, 1,000 are unemployed, and the rest are not in the labor force, what is the labor force participation rate?

$$\frac{7,000}{10,000} \times 100 = 70\%$$

Q: A country has 2,000 employed people and 500 unemployed people. What is the unemployment rate?

$$\frac{500}{2,500} \times 100 = 20\%$$

Q: If the cost of a market basket in the base year is $$200 and in the current year is 250$$, what is the Consumer Price Index (CPI) for the current year?

$$\frac{250}{200} \times 100 = 125$$

Q: If the CPI was 120 last year and 132 this year, what is the inflation rate for this year?

$$\frac{132 - 120}{120} \times 100 = 10\%$$

Question 1

Suppose the working-age population of a country is 10,000. If 6,000 people are employed, 1,000 are unemployed, and the rest are not in the labor force, what is the labor force participation rate?

Accepted Answer

$$\frac{7,000}{10,000} 	imes 100 = 70\%$$

Question 2

A country has 2,000 employed people and 500 unemployed people. What is the unemployment rate?

Accepted Answer

$$\frac{500}{2,500} 	imes 100 = 20\%$$

Question 3

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment caused by a mismatch between workers' skills and the skills needed for available jobs.

Question 4

If the cost of a market basket in the base year is $$200 and in the current year is 250$$, what is the Consumer Price Index (CPI) for the current year?

Accepted Answer

$$\frac{250}{200} 	imes 100 = 125$$

Question 5

If the CPI was 120 last year and 132 this year, what is the inflation rate for this year?

Accepted Answer

$$\frac{132 - 120}{120} 	imes 100 = 10\%$$

Question 6

A bank offers a nominal interest rate of 8%. If the inflation rate is 5%, what is the real interest rate?

Accepted Answer

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

Question 7

Which of the following is NOT a bias in the Consumer Price Index (CPI)?

Accepted Answer

Cyclical Bias

Question 8

Which policy is most likely to promote long-term economic growth according to New Growth Theory?

Accepted Answer

Subsidizing research and development (R&D)

Question 9

A country experiences a sudden increase in the number of discouraged workers. What is the likely effect on the official unemployment rate?

Accepted Answer

The unemployment rate will decrease because discouraged workers are not counted as unemployed.

Question 10

If a country increases its capital per hour worked but experiences diminishing returns, what will happen to output per hour worked?

Accepted Answer

Output per hour worked will increase, but by smaller and smaller amounts.

Question 11

Which of the following best illustrates the 'catch-up effect' in economic growth?

Accepted Answer

A low-income country grows rapidly by adopting technologies already used in high-income countries.

Question 12

Suppose the per-worker production function shifts upward. What is the most likely cause?

Accepted Answer

Technological change

Question 13

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job.

Question 14

If the nominal interest rate is 6% and the inflation rate is 8%, what is the real interest rate?

Accepted Answer

$$6\% - 8\% = -2\%$$

Question 15

Which of the following is most likely to reduce a country's long-term economic growth?

Accepted Answer

Weak property rights and high corruption

Question 16

A country has a labor force of 5,000 and 4,500 are employed. If 200 discouraged workers stop looking for jobs, what happens to the unemployment rate?

Accepted Answer

The unemployment rate decreases because the labor force shrinks.

Question 17

Which of the following is NOT included in the natural rate of unemployment?

Accepted Answer

Cyclical unemployment

Question 18

A country with a high rate of 'brain drain' is likely to experience which of the following?

Accepted Answer

Slower economic growth due to loss of skilled workers

Question 19

If the cost of a market basket was $$300 in the base year, 330 in $$year 1, and $363 in year 2, what is the inflation rate from year 1 to year 2?

Accepted Answer

$$\frac{363 - 330}{330} 	imes 100 = 10\%$$

Question 20

Which of the following best explains why the CPI may overstate the true cost of living?

Accepted Answer

It does not fully account for consumers substituting cheaper goods when prices change.

Macroeconomics Study Guide: Labor Markets, Inflation, and Economic Growth

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