Question 1

Which of the following best describes the difference between positive and normative economic analysis?

Accepted Answer

Positive analysis describes what is, while normative analysis describes what ought to be.

Question 2

Suppose the economy of Country X can produce only two goods: wheat and cars. If the opportunity cost of producing one car is 5 tons of wheat, what is the opportunity cost of producing one ton of wheat?

Accepted Answer

$$\frac{1}{5}$$ car

Question 3

If the nominal GDP in 2025 is $20,000 billion and the GDP deflator is 125, what is the real GDP for 2025?

Accepted Answer

$$\16$$,000	ext{ billion}$

Question 4

Which of the following would NOT be included in the calculation of GDP for the United States?

Accepted Answer

A used textbook sold by a student to another student

Question 5

If the Consumer Price Index (CPI) was 200 in 2020 and 220 in 2021, what was the inflation rate between 2020 and 2021?

Accepted Answer

$$10\%$$

Question 6

A country has a labor force of 100 million people, 90 million of whom are employed. What is the unemployment rate?

Accepted Answer

$$10\%$$

Question 7

Which of the following would cause a rightward shift in the aggregate demand (AD) curve?

Accepted Answer

An increase in consumer confidence

Question 8

If the required reserve ratio is $$10\%$$ and a bank receives a new deposit of $$\1$$,000$, what is the maximum possible increase in the money supply from this deposit, assuming no excess reserves and no currency drain?

Accepted Answer

$$\10$$,000$

Question 9

Which of the following best explains why the short-run aggregate supply (SRAS) curve is upward sloping?

Accepted Answer

Wages and some input prices are sticky in the short run.

Question 10

Suppose the government increases its purchases by $$\100$ million and the marginal propensity to consume (MPC) is 0.8$. What is the total change in GDP according to the government purchases multiplier?

Accepted Answer

$$\500$ million

Question 11

If the Federal Reserve wants to decrease the money supply, which of the following actions should it take?

Accepted Answer

Sell government securities in open market operations

Question 12

Which of the following is an example of an automatic stabilizer?

Accepted Answer

Unemployment insurance payments that increase during a recession

Question 13

If the velocity of money ($$V) is 4$$, the money supply ($$M) is$$ $$\2$ trillion, and nominal GDP (P$$ 	imes Y$$) is $$\$$8$$ trillion, which equation correctly represents the Quantity Theory of Money?

Accepted Answer

$$M 	imes V = P 	imes Y$$

Question 14

Suppose the real interest rate is $$3\%$$ and the inflation rate is $$2\%. $$What is the nominal interest rate according to the Fisher equation?

Accepted Answer

$$5\%$$

Question 15

If the economy is operating above potential GDP, which of the following is most likely to occur in the long run?

Accepted Answer

The short-run aggregate supply (SRAS) curve will shift left as wages and input prices rise.

Question 16

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

Accepted Answer

Government borrowing increases interest rates, reducing private investment.

Question 17

If the marginal propensity to consume (MPC) is $$0.75$$, what is the value of the tax multiplier?

Accepted Answer

$$-3$$

Question 18

Which of the following would be considered frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job

Question 19

According to the Rule of 70, if a country's real GDP per capita grows at $$2\%$$ per year, approximately how many years will it take for real GDP per capita to double?

Accepted Answer

35 years

Question 20

Which of the following statements about the Phillips curve is correct?

Accepted Answer

In the short run, there is a trade-off between inflation and unemployment.

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