macro test 2

📘 Macro Exam #2 Practice – Q&A Format

  1. Q: Changes in real GDP reflect
    A: only changes in the amounts being produced.

  2. Q: Suppose the government eliminates holidays and production increases. Which statement is correct?
    A: GDP would definitely increase because GDP excludes leisure.

  3. Q: How do economists measure economic growth?
    A: Percentage change in real GDP from one period to another.

  4. Q: Are Social Security recipients harmed by low inflation?
    A: It could be correct if their consumption basket differs from the CPI basket.

  5. Q: Government purchases include spending by
    A: federal, state, and local governments.

  6. Q: If natural unemployment is 4.7% and actual is 5.5%, what exists?
    A: Cyclical unemployment of 0.8%.

  7. Q: What are the correct steps for calculating CPI and inflation?
    A: Fix the basket → find prices → compute basket cost → choose base year & compute index → compute inflation rate.

  8. Q: What is the relationship between inflation and interest rates?
    A: To understand interest rates, we must correct for inflation.

  9. Q: Which household expenditure counts as investment?
    A: Purchase of a new house.

  10. Q: Are Social Security payments included in GDP?
    A: No, because they do not reflect production.

  11. Q: Minimum wages create unemployment when they create
    A: a surplus of labor (structural unemployment).

  12. Q: Who is eligible for unemployment benefits (Violett vs. Alexandra)?
    A: Alexandra but not Violett.

  13. Q: What do studies show about unemployment benefits?
    A: They decrease job search effort.

  14. Q: What is the percentage change in price level called?
    A: Inflation rate.

  15. Q: Cost of the basket in Year 2?
    A: $168.

  16. Q: What happens when minimum wage is above equilibrium?
    A: Surplus of labor and shortage of jobs.

  17. Q: What does efficiency wage theory explain?
    A: Firms may pay above-equilibrium wages.

  18. Q: Labor force calculation (140M population, 90M employed, 10M unemployed)?
    A: 40 million are not in the labor force.

  19. Q: Who qualifies for unemployment benefits?
    A: Those laid off because their employer no longer needs their skills.

  20. Q: If someone starts looking for their first job, what happens?
    A: Both unemployment rate and labor-force participation rate increase.