Q: If the GDP deflator in 2020 is 100 and in 2021 is 138.78, what is the percentage change in the price level from 2020 to 2021?

$\frac{138.78 - 100}{100} \times 100\% = 38.78\%$

Q: If the cost of a market basket is $200 in 2020 and $230 in 2021, the price index for 2021 using 2020 as the base year is:

$\frac{230}{200} \times 100 = 115$

Question 1

Suppose Country A can produce either 1000 widgets or 1000 gadgets per day, while Country B can produce either 200 widgets or 600 gadgets per day. What is the opportunity cost of producing 1 widget in Country B?

Accepted Answer

$\frac{1}{3}$ gadget

Question 2

Given the production possibilities for Country A and Country B, which country has the comparative advantage in producing gadgets?

Accepted Answer

Country B, because it has a lower opportunity cost for gadgets.

Question 3

If the price of a commodity increases, all other things unchanged, what would you expect to happen to the quantity demanded?

Accepted Answer

Quantity demanded to decrease.

Question 4

Using the table below, calculate the nominal GDP for 2021. 
Year: 2021 
Price of spinach: $4 
Quantity of spinach: 1,100 
Price of gasoline: $3 
Quantity of gasoline: 800

Accepted Answer

$4,400 + $2,400 = $6,800$

Question 5

If the GDP deflator in 2020 is 100 and in 2021 is 138.78, what is the percentage change in the price level from 2020 to 2021?

Accepted Answer

$\frac{138.78 - 100}{100} 	imes 100\% = 38.78\%$

Question 6

If the equilibrium price of soybeans is $8 per bushel and the equilibrium quantity is 20,000 bushels, what would happen if the market price was set at $4 per bushel?

Accepted Answer

There would be a shortage.

Question 7

Which of the following best describes the law of increasing opportunity cost as shown by a bowed-out production possibilities curve?

Accepted Answer

As more of one good is produced, the opportunity cost of producing additional units increases.

Question 8

If nominal GDP increases from $4,800 in 2020 to $6,800 in 2021, but real GDP (using 2020 as the base year) increases from $4,800 to $4,900, what does this indicate?

Accepted Answer

Most of the increase in nominal GDP is due to rising prices rather than increased output.

Question 9

Which of the following is an example of a capital good?

Accepted Answer

A gravel truck

Question 10

If the price of cotton rises, what happens in the market for cotton shirts, assuming all else is constant?

Accepted Answer

The equilibrium price rises and the equilibrium quantity falls.

Question 11

Which of the following would be counted as part of U.S. GDP?

Accepted Answer

The salary earned by a construction worker in New York.

Question 12

A nominal value is measured in current market prices while a real value is measured in:

Accepted Answer

Base year prices.

Question 13

If a country can produce more of both goods than another country using the same resources, it is said to have:

Accepted Answer

An absolute advantage.

Question 14

Which of the following would cause the supply curve for a good to shift to the right?

Accepted Answer

A technological improvement in production.

Question 15

If the cost of a market basket is $200 in 2020 and $230 in 2021, the price index for 2021 using 2020 as the base year is:

Accepted Answer

$\frac{230}{200} 	imes 100 = 115$

Question 16

Which of the following is a source of frictional unemployment?

Accepted Answer

The time it takes to search for jobs that best match one's skills.

Question 17

A number of semi-skilled workers in an industry find themselves out of work when improvements in technology render their jobs obsolete. These workers experience ______ unemployment.

Accepted Answer

Structural

Question 18

If the quantity of housing supplied in a community is less than the quantity of houses demanded at the existing price, what will happen?

Accepted Answer

There will be a shortage.

Question 19

Which of the following is included in the calculation of GDP?

Accepted Answer

Personal consumption, private investment, government purchases, and net exports.

Macroeconomics Study Guide: Production Possibilities, Opportunity Cost, GDP, and Market Fundamentals

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