Question 1

Suppose the price of coffee increases due to a poor harvest in Brazil. Which of the following best explains what happens in the coffee market according to the law of supply and demand?

Accepted Answer

The supply curve shifts to the left, leading to a higher equilibrium price and lower 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 its 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.

Question 4

If the nominal GDP of a country in 2022 is $$\1$$,000$$ billion and the GDP deflator is 125$, what is the real GDP for 2022?

Accepted Answer

$$\800$ billion

Question 5

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

The value of a used car sold from one consumer to another.

Question 6

Suppose the Consumer Price Index (CPI) was $$120$$ last year and $$126$$ this year. What is the inflation rate for this year?

Accepted Answer

$$5\%$$

Question 7

Which of the following best describes the Fisher Equation relating nominal and real interest rates?

Accepted Answer

$$i = r + \pi$$

Question 8

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

Accepted Answer

A technological innovation that increases productivity.

Question 9

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker is laid off because their skills are no longer needed due to automation.

Question 10

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

Accepted Answer

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

Question 11

Which of the following best describes allocative efficiency?

Accepted Answer

Producing the combination of goods and services most desired by society.

Question 12

Which of the following is a 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 13

If the labor force participation rate (LFPR) increases while the unemployment rate remains constant, what does this imply about the labor market?

Accepted Answer

More people are entering the labor force, but the proportion of unemployed to the labor force is unchanged.

Question 14

Which of the following statements about the yield curve is correct?

Accepted Answer

A normal yield curve shows higher yields for longer-term bonds than for short-term bonds.

Question 15

Which of the following is an example of opportunity cost?

Accepted Answer

The value of the next best alternative you give up when you choose to attend a concert instead of working.

Question 16

Suppose 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 apartments, as quantity demanded exceeds quantity supplied.

Question 17

Which of the following is true about GDP per capita?

Accepted Answer

It is calculated by dividing real GDP by the population.

Question 18

Which of the following best describes Adam Smith’s concept of the 'invisible hand'?

Accepted Answer

Individuals pursuing their own self-interest unintentionally benefit society as a whole.

Question 19

If the coupon rate on a bond is $$5\%$$ and the market interest rate rises to $$7\%$$, what happens to the price of the bond?

Accepted Answer

The price of the bond falls below its face value.

Question 20

Which of the following is a correct formula for calculating the GDP deflator?

Accepted Answer

$$	ext{GDP Deflator} = \frac{	ext{Nominal GDP}}{	ext{Real GDP}} 	imes 100$$

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

Study Guide - Practice Questions

Study Guide - Flashcards