Q: Suppose the nominal GDP in 2022 is $$22,000$$ and the real GDP in 2022 (using 2017 as the base year) is $$20,000. $$What is the GDP deflator for 2022?

$$GDP\ deflator = \frac{Nominal\ GDP}{Real\ GDP} \times 100 = \frac{22,000}{20,000} \times 100 = 110$$

Q: A country produces only two goods: computers and bread. In 2017 (the base year), it produced 100 computers at $$\1$$,000$$ each and 10,000 loaves of bread at $$\$$2$$ each. In 2025, it produced 120 computers at $$\1$$,200$$ each and 12,000 loaves of bread at $$\$$2.50$$ each. What is the real GDP in 2025 using 2017 prices?

$$Real\ GDP_{2025} = (120 \times 1,000) + (12,000 \times 2) = 120,000 + 24,000 = 144,000$$

Question 1

Which of the following best describes the concept of 'adverse selection' in the health insurance market?

Accepted Answer

It occurs when people with higher health risks are more likely to purchase health insurance, leading to higher costs for insurers.

Question 2

Suppose the nominal GDP in 2022 is $$22,000$$ and the real GDP in 2022 (using 2017 as the base year) is $$20,000. $$What is the GDP deflator for 2022?

Accepted Answer

$$GDP\ deflator = \frac{Nominal\ GDP}{Real\ GDP} 	imes 100 = \frac{22,000}{20,000} 	imes 100 = 110$$

Question 3

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

Accepted Answer

The sale of a used house.

Question 4

A country produces only two goods: computers and bread. In 2017 (the base year), it produced 100 computers at $$\1$$,000$$ each and 10,000 loaves of bread at $$\$$2$$ each. In 2025, it produced 120 computers at $$\1$$,200$$ each and 12,000 loaves of bread at $$\$$2.50$$ each. What is the real GDP in 2025 using 2017 prices?

Accepted Answer

$$Real\ GDP_{2025} = (120 	imes 1,000) + (12,000 	imes 2) = 120,000 + 24,000 = 144,000$$

Question 5

Which of the following is an example of a positive externality in health care?

Accepted Answer

A person who receives a vaccination reduces the chance of others getting sick.

Question 6

If the inflation rate is 5% and the nominal interest rate on a loan is 8%, what is the real interest rate?

Accepted Answer

$$Real\ Interest\ Rate = Nominal\ Interest\ Rate - Inflation\ Rate = 8\% - 5\% = 3\%$$

Question 7

Which of the following best explains why the United States spends a higher proportion of its income on health care compared to other high-income countries?

Accepted Answer

The U.S. has higher demand for health care, higher quality of care, and a unique payment system.

Question 8

Which of the following is a likely effect of a $$0.50$$ per gallon tariff on imported ethanol in the U.S. market?

Accepted Answer

Consumer surplus falls, producer surplus rises, and there is a deadweight loss.

Question 9

A firm’s balance sheet shows assets of $$500,000$$ and liabilities of $$350,000. $$What is the firm’s net worth (stockholders’ equity)?

Accepted Answer

$$Net\ Worth = Assets - Liabilities = 500,000 - 350,000 = 150,000$$

Question 10

Which of the following is an example of structural unemployment?

Accepted Answer

A hand-drawn animator loses a job because the industry now uses computer animation.

Question 11

If a country has a comparative advantage in producing wheat, what does this mean?

Accepted Answer

It can produce wheat at a lower opportunity cost than other countries.

Question 12

Which of the following is a shortcoming of using GDP per capita as a measure of well-being?

Accepted Answer

It does not account for the value of leisure time.

Question 13

Which of the following government policies is most likely to reduce structural unemployment?

Accepted Answer

Providing retraining programs for workers whose jobs have become obsolete.

Question 14

Suppose the CPI was 120 in 2010 and 150 in 2020. If a worker earned $40,000 in 2010, what is the equivalent salary in 2020 dollars?

Accepted Answer

$$Equivalent\ Salary = 40,000 	imes \frac{150}{120} = 40,000 	imes 1.25 = 50,000$$

Question 15

Which of the following is a principal-agent problem in corporate governance?

Accepted Answer

Managers pursue their own interests rather than maximizing shareholder value.

Question 16

Which of the following is a likely effect of a country unilaterally eliminating all tariffs and quotas, even if other countries do not?

Accepted Answer

Domestic consumers benefit from lower prices, and overall economic surplus increases.

Question 17

If the labor force participation rate increases while the unemployment rate remains constant, what must be true?

Accepted Answer

The number of people employed has increased.

Question 18

Which of the following is an example of direct finance?

Accepted Answer

A corporation issues bonds to investors in the stock market.

Question 19

Which of the following best describes the effect of moral hazard in health insurance?

Accepted Answer

People with insurance may use more health care services than necessary because they do not bear the full cost.

Macroeconomics: Study Notes on Health Care, Firms, GDP, International Trade, and Unemployment & Inflation

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