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 entire demand curve due to factors like income or preferences.

Question 3

Country A can produce either 10 units of wheat or 20 units of cloth with the same resources, while Country B can produce either 8 units of wheat or 16 units of cloth. According to the law of comparative advantage, which good should Country A specialize in?

Accepted Answer

Country A should specialize in cloth because it has a lower opportunity cost in cloth production.

Question 4

If the government imposes a price ceiling below the equilibrium price in the market for rental apartments, what is the most likely outcome?

Accepted Answer

A shortage of rental apartments.

Question 5

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 by individuals.

Question 6

Suppose nominal GDP in 2022 is $$ \ 5$${,}000 $$ billion and the GDP deflator is  125$$ $. What is real GDP for 2022?

Accepted Answer

$$ \ 4$${,}000 $ billion

Question 7

Which of the following best explains why the Consumer Price Index (CPI) may overstate the true rate of inflation?

Accepted Answer

It does not account for substitution bias, where consumers switch to cheaper alternatives.

Question 8

If the nominal interest rate is $$ 8\% $$ and the inflation rate is $$ 3\% $$, what is the real interest rate according to the Fisher equation?

Accepted Answer

$$ 5\% $$

Question 9

Which of the following would cause the production possibilities curve (PPC) to shift outward?

Accepted Answer

A technological innovation that increases productivity.

Question 10

Which of the following statements about GDP is correct?

Accepted Answer

GDP measures only the market value of final goods and services produced within a country in a given period.

Question 11

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

Accepted Answer

Equilibrium price is indeterminate, but equilibrium quantity will definitely rise.

Question 12

Which of the following is an example of allocative efficiency?

Accepted Answer

Resources are distributed so that the mix of goods and services produced matches consumer preferences.

Question 13

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment resulting from a mismatch between workers' skills and the skills needed for available jobs.

Question 14

Suppose the labor force participation rate (LFPR) in a country is $$ 60\% $$ and the working-age population is $$ 100 $$ million. If $$ 54 $$ million people are employed, what is the unemployment rate?

Accepted Answer

$$ 6.7\% $$

Question 15

Which of the following is most likely to cause an inverted yield curve in the bond market?

Accepted Answer

Investors expect a future economic slowdown or recession.

Question 16

Adam Smith argued that specialization and division of labor lead to which of the following outcomes?

Accepted Answer

Increased productivity and economic growth.

Question 17

If the price level increases by $$ 4\% $$ and nominal GDP increases by $$ 6\% $$, what is the approximate percentage change in real GDP?

Accepted Answer

$$ 2\% $$

Question 18

Which of the following is a cost of inflation?

Accepted Answer

Menu costs, such as the expense of changing prices frequently.

Question 19

Which of the following best describes the 'resource curse' as discussed in class readings?

Accepted Answer

Countries with abundant natural resources may experience slower economic growth due to mismanagement and corruption.

Question 20

If the government increases its spending (G) while all other components of aggregate expenditures remain constant, what is the immediate effect on GDP according to the aggregate expenditures model?

Accepted Answer

GDP will increase.

Macroeconomics Study Guide: Markets, GDP, Trade, and Economic Indicators

Study Guide - Practice Questions

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