1) In an economy, if the real GDP is $50 billion and the GDP deflator is 150, what would be the value of the total output in the economy at the current market prices?

a) $50 billion

b) $75 billion

c) $3 billion

d) $7,500 billion

e) $100 billion

2) The GDP is a measure of the ________ of a country but does not take into account the ________.

a) productivity; cost of environmental pollution

b) standard of living; compensation given to employees

c) purchasing power; non-market transactions in the country

d) life expectancy; private consumption by households

e) government spending; contribution of household members in childcare

3) The CPI is calculated on the basis of a basket of _____ products, but is temporarily misrepresented due to the introduction of ____ products.

a) new; old

b) new; common

c) common; new

d) common; old

e) old; common

4) Which of the following statements accurately describes the different types of unemployment?

a) There will always be cyclical unemployment.

b) Structural unemployment must always be greater than frictional unemployment.

c) The natural rate of unemployment will always equal five percent and never change.

d) The actual unemployment rate is the sum of the natural and cyclical unemployment rates.

e) Full employment is achieved when the actual unemployment rate is zero.

5) A country's unemployment rate is extraordinarily low and inflation is beginning to rise sharply. Its real GDP growth is still positive but has started to slow down. Which point of the business cycle best describes this economy?

a) Peak

b) Trough

c) Contraction

d) Potential and real GDP are equal

e) Cyclical unemployment is greater than the NRU

6) An economy's natural unemployment rate is 7 percent, its frictional unemployment rate is 2 percent, and its actual unemployment rate is 11 percent. Based on this data, its structural unemployment rate is ________, and its cyclical unemployment rate is ________.

a) 5 percent; 2 percent

b) 11 percent; 7 percent

c) 5 percent; 4 percent

d) 9 percent; 4 percent

e) 5 percent; 7 percent

7) Which of the following goods would be directly counted as part of a country's GDP?

a) The change in business inventories from the previous year

b) A stimulus check from the government to households

c) The market value of tutoring services freely provided by a non-profit

d) The aggregate total of childcare services provided by older siblings

e) The sales of American companies from factories located outside the United States

8) If an unemployed worker does not take any action to seek employment for more than four weeks, which of the following would happen to the employment statistics?

a) The unemployment rate and the labor force participation rate would both increase.

b) The unemployment rate would increase, and the labor force participation rate would decrease.

c) The unemployment rate and labor force participation rate would decrease.

d) The unemployment rate would decrease, and the labor force participation rate would increase.

e) The unemployment rate would stay constant, and the labor force participation rate would decrease.

9) Assume that an economy produces only two goods, A and B. In the base year, it produces 2 units of A at a price of $2 and 4 units of B at a price of $4. If the next year it produces the same quantity of each good with a $1 price increase for both, what is the consumer price index for that year?

a) 30

b) 76.9

c) 125

d) 130

e) 175

10) Which of the following is true if the economy is producing above the full employment level?

a) There is a recessionary output gap, and the actual unemployment is more than the natural unemployment level.

b) There is an inflationary output gap, and the actual unemployment is more than the natural unemployment level.

c) There is an inflationary output gap, and the actual unemployment is less than the natural unemployment level.

d) There is a recessionary output gap, and the actual unemployment is less than the natural unemployment level.

e) There is no output gap, and the economy has grown in terms of its potential level of output in the long run.

11) If the CPI for a given year is 170 and the price of a basket of goods is $40 in the base year, what is the price of the basket in the given year?

a) $4.25

b) $23

c) $68

d) $40

e) $130

12) Which of the following represents a limitation in the measurement of the GDP?

a) Inventories of businesses are measured in the GDP.

b) Products from household production are not included in the GDP.

c) Household expenditure is calculated while measuring the GDP.

d) A net export of the domestic country is not included in the GDP.

e) Private investment expenditure is not included in the GDP.

13) How does a circular flow model illustrate GDP?

a) The circular flow model is a visualization of the economic transactions across the economy.

b) The circular flow model shows only the factor payments received by households.

c) The circular flow model represents the balance of payments of the government.

d) The circular flow model is a visualization of economic transactions in foreign countries.

e) The circular flow model represents the long-run equilibrium in an economy.

14) For country XYZ, a study shows that the nominal GDP was $2,400 billion, whereas the real GDP was less than the nominal GDP because of the GDP deflator that was standing at 120. Considering this, what was the value of real GDP?

a) $4,800 billion

b) $3,600 billion

c) $1,200 billion

d) $2,000 billion

e) $2,400 billion

15) If the government of a country instituted a policy that led to an unexpected decrease in consumer prices, which of the following groups would inherently benefit?

a) People whose incomes are automatically adjusted with inflation

b) People on fixed incomes

c) Borrowers of fixed interest rates

d) Borrowers of variable interest rates

e) Businesses that had taken out large capital loans

16) A consumer price index going from 140 in year 1 to 130 in year 2 means the economy is experiencing

a) depression

b) deflation

c) inflation

d) recession

e) stagflation