Q: Suppose the price of coffee increases from $4 to $5 per cup. What is the percentage increase in price?

$\frac{(5-4)}{4} \times 100 = 25\%$

Q: If the Consumer Price Index (CPI) was 120 in 2010 and 150 in 2020, what was the inflation rate over this period?

$\frac{(150-120)}{120} \times 100 = 25\%$

Question 1

Which of the following best describes the difference between macroeconomics and microeconomics?

Accepted Answer

Macroeconomics examines aggregate economic variables such as GDP and unemployment, while microeconomics analyzes individual markets and decision-makers.

Question 2

Suppose the price of coffee increases from $4 to $5 per cup. What is the percentage increase in price?

Accepted Answer

$\frac{(5-4)}{4} 	imes 100 = 25\%$

Question 3

Which of the following is an example of a positive economic statement?

Accepted Answer

"Raising taxes will reduce the budget deficit."

Question 4

If the Consumer Price Index (CPI) was 120 in 2010 and 150 in 2020, what was the inflation rate over this period?

Accepted Answer

$\frac{(150-120)}{120} 	imes 100 = 25\%$

Question 5

Which of the following would cause a movement along the demand curve for pizza?

Accepted Answer

A decrease in the price of pizza.

Question 6

If nominal GDP in 2022 is $\$1,200$ billion and the GDP deflator is $120$, what is real GDP in 2022?

Accepted Answer

$\frac{1,200}{1.2} = \$1,000$ billion

Question 7

Which of the following best defines GDP (Gross Domestic Product)?

Accepted Answer

The total value of all final goods and services produced within a country's borders in a given period.

Question 8

A country has a population of 50 million and a GDP of $\$2,500$ billion. What is its per capita GDP?

Accepted Answer

$\frac{2,500,000,000,000}{50,000,000} = \$50,000$

Question 9

Which of the following would be included in the calculation of GDP using the expenditure approach?

Accepted Answer

A new car purchased by a household.

Question 10

If you invest $\$100$ at an annual interest rate of $5\%$ for 3 years, how much will you have at the end of 3 years? (Compound annually)

Accepted Answer

$100 	imes (1.05)^3 = $115.76

Question 11

Which of the following best describes the concept of empiricism in economics?

Accepted Answer

Using data and evidence to test economic theories and hypotheses.

Question 12

Suppose the mean income in a small town is $\$40,000$ and the median income is $\$30,000$. What does this suggest about the income distribution?

Accepted Answer

The distribution is skewed to the right (positively skewed).

Question 13

Which of the following would cause a shift in the supply curve for smartphones?

Accepted Answer

A technological innovation that reduces production costs.

Question 14

If the GDP deflator in 2021 is 110 and in 2022 is 121, what is the inflation rate from 2021 to 2022?

Accepted Answer

$\frac{(121-110)}{110} 	imes 100 = 10\%$

Question 15

Which of the following is NOT a component of GDP in the expenditure approach formula $Y = C + I + G + X - M$?

Accepted Answer

Transfer payments

Question 16

A recession is best defined as:

Accepted Answer

A period of significant decline in economic activity spread across the economy, lasting more than a few months.

Question 17

If the CPI in 2000 was 150 and in 2020 it is 225, what salary in 2020 is equivalent to a $\$40,000$ salary in 2000?

Accepted Answer

$40,000 	imes \frac{225}{150} = $60,000

Question 18

Which of the following best illustrates the difference between causation and correlation?

Accepted Answer

Ice cream sales and drowning rates both rise in summer, but eating ice cream does not cause drowning.

Question 19

If a country's nominal GDP increased from $\$1,000$ billion to $\$1,200$ billion, and the GDP deflator increased from 100 to 120, what is the real GDP growth rate?

Accepted Answer

Real GDP in year 1: $\frac{1,000}{1.00} = 1,000$; Real GDP in year 2: $\frac{1,200}{1.20} = 1,000$; Growth rate: $0\%$

Question 20

Which of the following is the primary use of the Consumer Price Index (CPI)?

Accepted Answer

To measure changes in the cost of living over time.

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