Q: A country’s nominal GDP in 2022 is $$ \1$${,}200 $$ billion, and its real GDP (in 2015 dollars) is $$ \$$1{,}000 $$ billion. What is the GDP deflator for 2022?

$$ \frac{1{,}200}{1{,}000} \times 100 = 120 $$

Question 1

Suppose the price of coffee increases. According to the law of demand, what is the most likely immediate effect on the quantity demanded of coffee, holding all else constant?

Accepted Answer

The quantity demanded of coffee will decrease.

Question 2

If the price of oranges rises, and as a result, consumers buy more peaches, which economic concept best explains this behavior?

Accepted Answer

Substitution effect

Question 3

Which of the following would cause a shift in the demand curve for new cars to the right?

Accepted Answer

An increase in consumer incomes, assuming cars are normal goods

Question 4

Which of the following is NOT included in the calculation of a country's GDP?

Accepted Answer

The value of a used car sold from one consumer to another

Question 5

Suppose a drought reduces the supply of lettuce. What is the most likely effect on the equilibrium price and quantity of lettuce?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases

Question 6

A country’s nominal GDP in 2022 is $$ \1$${,}200 $$ billion, and its real GDP (in 2015 dollars) is $$ \$$1{,}000 $$ billion. What is the GDP deflator for 2022?

Accepted Answer

$$ \frac{1{,}200}{1{,}000} 	imes 100 = 120 $$

Question 7

Which of the following best describes an inferior good?

Accepted Answer

A good for which demand increases when income decreases

Question 8

If the government increases its purchases of goods and services by $$ \50$$ $ billion, all else equal, which component of GDP is directly affected?

Accepted Answer

Government Purchases ($$ G )$$

Question 9

Which of the following transactions would be counted in the calculation of U.S. GDP for 2023?

Accepted Answer

A new airplane manufactured in the U.S. and sold to a German airline

Question 10

During a recession, which of the following typically occurs?

Accepted Answer

Total production and employment decrease

Question 11

If the price of creamer (a complement to coffee) rises, what is the likely effect on the demand for coffee?

Accepted Answer

The demand for coffee decreases

Question 12

Suppose nominal GDP increased by 5% from one year to the next, but real GDP increased by only 2%. What does this imply about the price level?

Accepted Answer

The price level increased by approximately 3%

Question 13

Which of the following is an example of an intermediate good?

Accepted Answer

Steel purchased by a car manufacturer to produce cars

Question 14

A shortage in a market occurs when:

Accepted Answer

Quantity demanded exceeds quantity supplied at the current price

Question 15

If the price of a normal good falls, which of the following effects will NOT occur?

Accepted Answer

The demand curve for the good shifts to the right

Question 16

Which formula correctly represents the expenditure approach to calculating GDP?

Accepted Answer

$$ GDP = C + I + G + (X - M) $$

Question 17

A car manufacturer buys $$ \5$$,000 $$ worth of steel, uses it to make a car, and sells the car to a dealer for $$ \$$20,000 . $$The dealer then sells the car to a consumer for $$ \25$$,000 $. What is the total value added at all stages?

Accepted Answer

$$ 5,000 + 15,000 + 5,000 = 25,000 $$

Question 18

Which of the following is NOT a reason why the underground economy is excluded from official GDP calculations?

Accepted Answer

Including these transactions would overstate the official GDP

Question 19

If the supply of a good increases while demand remains unchanged, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases

Question 20

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

Accepted Answer

Nominal GDP is measured in current prices, while real GDP is measured in base-year prices

Principles of Macroeconomics: Supply & Demand, Market Equilibrium, and GDP

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