Q: Suppose the cost of the CPI basket in the base year is $$500 and in the current year is 600. $$What is the Consumer Price Index (CPI) for the current year?

$$CPI = \frac{600}{500} \times 100 = 120$$

Q: Which of the following formulas correctly calculates the unemployment rate?

$$\text{Unemployment Rate} = \frac{\text{Number of people unemployed}}{\text{Number of people in the labor force}} \times 100$$

Question 1

Which of the following best describes the difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP measures the value of final goods and services at current prices, while real GDP measures them at base-year prices.

Question 2

Suppose the cost of the CPI basket in the base year is $$500 and in the current year is 600. $$What is the Consumer Price Index (CPI) for the current year?

Accepted Answer

$$CPI = \frac{600}{500} 	imes 100 = 120$$

Question 3

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

Accepted Answer

The value of a used car sold between two US households.

Question 4

If the unemployment rate is higher than the natural unemployment rate, which of the following is true?

Accepted Answer

Cyclical unemployment is present.

Question 5

A discouraged worker is best described as:

Accepted Answer

Someone who has no job, wants a job, but has stopped looking due to repeated failure.

Question 6

Which of the following formulas correctly calculates the unemployment rate?

Accepted Answer

$$	ext{Unemployment Rate} = \frac{	ext{Number of people unemployed}}{	ext{Number of people in the labor force}} 	imes 100$$

Question 7

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker whose job was replaced by automation and now lacks the skills for available jobs.

Question 8

If the labor force participation rate falls, which of the following is most likely to have occurred?

Accepted Answer

More people have left the labor force, possibly by stopping their job search.

Question 9

Suppose the real wage rate increases. According to the law of supply and demand in the labor market, what is the likely outcome?

Accepted Answer

The quantity of labor supplied will increase, and the quantity of labor demanded will decrease.

Question 10

Which of the following best explains why the CPI inflation rate tends to overestimate actual inflation?

Accepted Answer

The CPI does not account for new goods, quality changes, or substitution effects.

Question 11

If the growth rate of real GDP is 4% and the growth rate of population is 2%, what is the approximate growth rate of real GDP per person?

Accepted Answer

2%

Question 12

Which of the following is a limitation of using real GDP to compare standards of living across countries?

Accepted Answer

Real GDP does not account for differences in price levels between countries.

Question 13

According to the Rule of 70, if a country's real GDP grows at 5% per year, how many years will it take for real GDP to double?

Accepted Answer

$$\frac{70}{5} = 14$$ years

Question 14

Which of the following is most likely to increase potential GDP in the long run?

Accepted Answer

An increase in labor productivity due to technological advances.

Question 15

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job.

Question 16

If unexpected inflation occurs, who is most likely to benefit?

Accepted Answer

Borrowers who took out fixed-rate loans.

Question 17

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

Accepted Answer

Depreciation

Question 18

Which economic growth theory argues that knowledge is a public good and that technological progress can lead to permanent growth?

Accepted Answer

New growth theory

Question 19

Suppose the CPI last year was 200 and this year it is 210. What is the inflation rate?

Accepted Answer

$$\frac{210-200}{200} 	imes 100 = 5\%$$

Question 20

Which of the following would cause the natural unemployment rate to increase?

Accepted Answer

A younger population and more generous unemployment benefits.

Monitoring Jobs, Inflation, and Economic Growth: Core Concepts in Macroeconomics

Study Guide - Practice Questions

Study Guide - Flashcards