Q: Suppose the CPI in 2022 was 250 and in 2021 it was 240. What was the inflation rate in 2022?

$$\frac{250 - 240}{240} \times 100 = 4.17\%$$

Q: If the labor force is 160 million and the number of unemployed is 8 million, what is the unemployment rate?

$$\frac{8}{160} \times 100 = 5\%$$

Q: A country’s real GDP grew from $$10 trillion to 10.5 $$trillion in one year. What is the growth rate of real GDP?

$$\frac{10.5 - 10}{10} \times 100 = 5\%$$

Q: If the working-age population is 250 million and the labor force is 150 million, what is the labor force participation rate?

$$\frac{150}{250} \times 100 = 60\%$$

Q: The employment-to-population ratio is calculated as:

$$\frac{\text{Number employed}}{\text{Adult population}} \times 100$$

Question 1

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

Accepted Answer

Nominal GDP values production at current prices, while real GDP values production at constant prices.

Question 2

Suppose the CPI in 2022 was 250 and in 2021 it was 240. What was the inflation rate in 2022?

Accepted Answer

$$\frac{250 - 240}{240} 	imes 100 = 4.17\%$$

Question 3

Which of the following is a potential source of bias in the Consumer Price Index (CPI)?

Accepted Answer

Commodity substitution bias

Question 4

If the labor force is 160 million and the number of unemployed is 8 million, what is the unemployment rate?

Accepted Answer

$$\frac{8}{160} 	imes 100 = 5\%$$

Question 5

Which of the following best describes frictional unemployment?

Accepted Answer

Unemployment due to workers changing jobs or entering the labor force

Question 6

A country’s real GDP grew from $$10 trillion to 10.5 $$trillion in one year. What is the growth rate of real GDP?

Accepted Answer

$$\frac{10.5 - 10}{10} 	imes 100 = 5\%$$

Question 7

Which of the following is NOT a factor of production?

Accepted Answer

Inflation rate

Question 8

If the working-age population is 250 million and the labor force is 150 million, what is the labor force participation rate?

Accepted Answer

$$\frac{150}{250} 	imes 100 = 60\%$$

Question 9

Which of the following statements about the GDP deflator is correct?

Accepted Answer

It measures the average price of all goods and services included in GDP relative to a base year.

Question 10

Which type of unemployment is most likely to increase during a recession?

Accepted Answer

Cyclical unemployment

Question 11

If the CPI overstates inflation due to not accounting for consumers switching to cheaper alternatives, this is known as:

Accepted Answer

Commodity substitution bias

Question 12

Which of the following is a cost of unemployment?

Accepted Answer

Loss of potential output

Question 13

The employment-to-population ratio is calculated as:

Accepted Answer

$$\frac{	ext{Number employed}}{	ext{Adult population}} 	imes 100$$

Question 14

Which of the following best explains why the Federal Reserve prefers the PCE deflator over the CPI?

Accepted Answer

The PCE deflator uses a changing basket of goods and includes imported consumer goods.

Question 15

If a country’s real GDP per person grows at 2% per year, approximately how many years will it take for the standard of living to double?

Accepted Answer

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

Question 16

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker loses their job because their skills are no longer needed due to automation.

Question 17

Which of the following is true about full employment?

Accepted Answer

It occurs when there is no cyclical unemployment.

Question 18

If the CPI in July 2008 was 220.0 and in July 2009 it was 215.4, what was the inflation rate?

Accepted Answer

$$\frac{215.4 - 220.0}{220.0} 	imes 100 = -2.1\%$$

Question 19

Which of the following is a benefit of recessions, according to macroeconomic theory?

Accepted Answer

They can help eliminate inefficient firms and reallocate resources.

Long-Run and Short-Run Concerns: Growth, Productivity, Unemployment, and Inflation

Study Guide - Practice Questions

Study Guide - Flashcards