Q: If the labor force in a country is 200 million and 180 million people are employed, what is the unemployment rate?

$$\frac{20}{200} \times 100 = 10\%$$

Q: Suppose the Consumer Price Index (CPI) was 200 in 2024 and 210 in 2025. What is the inflation rate between 2024 and 2025?

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

Question 1

Which of the following transactions would be included in the calculation of a country's Gross Domestic Product (GDP) using the final goods production approach?

Accepted Answer

A consumer buys a new car produced domestically.

Question 2

Suppose nominal GDP in 2025 is \$$20 trillion and the GDP deflator is $$\$$1.25. $$What is real GDP in 2025?

Accepted Answer

$$\16$ trillion

Question 3

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

Accepted Answer

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

Question 4

If the labor force in a country is 200 million and 180 million people are employed, what is the unemployment rate?

Accepted Answer

$$\frac{20}{200} 	imes 100 = 10\%$$

Question 5

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

Accepted Answer

The value of unpaid household work

Question 6

Suppose the Consumer Price Index (CPI) was 200 in 2024 and 210 in 2025. What is the inflation rate between 2024 and 2025?

Accepted Answer

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

Question 7

In the context of the goods market, which equation correctly represents aggregate expenditure (AE) in a closed economy?

Accepted Answer

$$AE = C + I + G$$

Question 8

If the marginal propensity to consume (MPC) is $$0.8$$, what is the value of the spending multiplier?

Accepted Answer

$$\frac{1}{1 - 0.8} = 5$$

Question 9

Suppose the consumption function is $$C = 200 + 0.75Y_d$$, where $$Y_d is $$disposable income. If disposable income increases by $$\100$, by how much does consumption increase?

Accepted Answer

$$0.75 	imes 100 = \75$

Question 10

If government spending increases by $$\50$ million and the spending multiplier is 4$, what is the resulting change in equilibrium output?

Accepted Answer

$$4 	imes 50 = \200$ million

Question 11

Which of the following best describes the IS relation in a closed economy?

Accepted Answer

It is the condition where total saving equals investment: $$S = I.$$

Question 12

If the money demand function is $$M^d = 0.25Y - 1000i$$, where $$Y is $$income and $$i is $$the interest rate, and the money supply is $$M^s = 2000$$, with $$Y = 8000$$, what is the equilibrium interest rate?

Accepted Answer

$$i = 0.5$$

Question 13

Which of the following would cause the equilibrium interest rate to decrease in the money market?

Accepted Answer

An increase in the money supply

Question 14

If the central bank conducts an expansionary open market operation, what is the immediate effect on the central bank's balance sheet?

Accepted Answer

Assets increase and liabilities increase

Question 15

Which of the following best explains why banks may want to hold reserves?

Accepted Answer

To meet withdrawal demands and regulatory requirements

Question 16

Suppose the price of a bond falls. What happens to the yield (interest rate) on the bond?

Accepted Answer

The yield increases

Question 17

Which of the following scenarios best illustrates a liquidity trap?

Accepted Answer

The central bank increases the money supply, but the interest rate does not fall further.

Question 18

If the labor force participation rate is $$60\%$$ and the working-age population is 250 million, what is the size of the labor force?

Accepted Answer

$$0.6 	imes 250 = 150$$ million

Question 19

Which of the following statements about deflation and disinflation is correct?

Accepted Answer

Deflation is a decrease in the price level, while disinflation is a decrease in the rate of inflation.

Question 20

If private saving is defined as $$S_p = Y_d - C$$, and disposable income increases while the marginal propensity to consume remains constant, what happens to private saving?

Accepted Answer

Private saving increases

Macroeconomics Exam 1 Study Guide: Measuring Macroeconomic Data, The Goods Market, and Financial Markets

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