Q: Suppose the nominal GDP of a country in 2022 is $$20 trillion, and the real GDP (in base year prices) is 18 $$trillion. What is the GDP deflator for 2022?

$$\frac{20}{18} \times 100 = 111.1$$

Q: If the Consumer Price Index (CPI) was 120 in 2021 and 132 in 2022, what was the inflation rate between 2021 and 2022?

$$\frac{132-120}{120} \times 100 = 10\%$$

Q: Suppose the government increases transfer payments by $100 million, and the transfer payments multiplier is 1.5. What is the total change in real GDP?

$$100 \text{ million} \times 1.5 = 150 \text{ million}$$

Q: If the labor force is 150 million and the number of employed workers is 140 million, what is the unemployment rate?

$$\frac{10}{150} \times 100 = 6.67\%$$

Question 1

Suppose the nominal GDP of a country in 2022 is $$20 trillion, and the real GDP (in base year prices) is 18 $$trillion. What is the GDP deflator for 2022?

Accepted Answer

$$\frac{20}{18} 	imes 100 = 111.1$$

Question 2

If the unemployment rate is 6%, the labor force participation rate is 70%, and the working-age population is 200 million, how many people are unemployed?

Accepted Answer

8.4 million

Question 3

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

Accepted Answer

The value of illegal drug sales

Question 4

Country A can produce either 10 units of wheat or 20 units of corn with the same resources. Country B can produce either 8 units of wheat or 16 units of corn. Which country has the comparative advantage in wheat?

Accepted Answer

Country A and Country B have the same opportunity cost

Question 5

If the Consumer Price Index (CPI) was 120 in 2021 and 132 in 2022, what was the inflation rate between 2021 and 2022?

Accepted Answer

$$\frac{132-120}{120} 	imes 100 = 10\%$$

Question 6

Which of the following best describes the 'crowding out' effect?

Accepted Answer

An increase in government spending raises interest rates, reducing private investment

Question 7

If the real interest rate is 2% and the inflation rate is 3%, what is the nominal interest rate?

Accepted Answer

5%

Question 8

Suppose the money supply grows at 8% per year and real GDP grows at 3% per year. According to the quantity theory of money, what is the predicted inflation rate?

Accepted Answer

5%

Question 9

Which of the following would shift the short-run aggregate supply (SRAS) curve to the right?

Accepted Answer

A technological improvement

Question 10

If the growth rate of real GDP is 2% per year, approximately how many years will it take for real GDP to double?

Accepted Answer

$$\frac{70}{2} = 35$$ years

Question 11

Which of the following is a function of money that is most directly undermined by high and unpredictable inflation?

Accepted Answer

Store of value

Question 12

A country is experiencing a recession. Which of the following fiscal policy actions would be considered expansionary?

Accepted Answer

Increasing government purchases

Question 13

If the Federal Reserve wants to decrease the federal funds rate in the current ample reserves regime, which tool is most effective?

Accepted Answer

Lowering the interest rate on reserve balances (IORB)

Question 14

Which of the following is NOT a shortcoming of GDP as a measure of well-being?

Accepted Answer

It includes the value of illegal activities

Question 15

Suppose the government increases transfer payments by $100 million, and the transfer payments multiplier is 1.5. What is the total change in real GDP?

Accepted Answer

$$100 	ext{ million} 	imes 1.5 = 150 	ext{ million}$$

Question 16

Which of the following would cause the aggregate demand (AD) curve to shift to the left?

Accepted Answer

An increase in taxes

Question 17

If the labor force is 150 million and the number of employed workers is 140 million, what is the unemployment rate?

Accepted Answer

$$\frac{10}{150} 	imes 100 = 6.67\%$$

Question 18

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job

Question 19

Which of the following best explains why quotas are generally considered worse than tariffs?

Accepted Answer

Quotas benefit both domestic and foreign producers, making them harder to remove

Question 20

If the price level increases unexpectedly, who is most likely to benefit?

Accepted Answer

Borrowers

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