Macroeconomics Final Exam - SAIS –
Mankiw Questions and Correct
Answers 2026 Updated.
Microeconomics - Answer Study of a single factor of an economy - such as individuals,
households, businesses, & industries - rather than an economy as a whole.
Macroeconomics - Answer Concentrates on the operation of a nation's economy as a whole.
GDP - Answer Gross Domestic Product- the total market value of all final goods and services
produced annually in an economy
Consumption - Answer (economics) the utilization of economic goods to satisfy needs or in
manufacturing
Investment - Answer Expenditures on (production of) new plant, equipment, and structures
(capital) in a given time period, plus changes in business inventories.
Government Purchases - Answer (G) expenditures by government for goods and services
that government consumes in providing public goods and for public (or social) capital that has a
long lifetime; the expenditures of all governments in the economy for those final goods and
services
Net Exports - Answer Exports minus imports
Nominal GDP - Answer Computed in current dollars - Measures Nominal Value - Change in
Price and Quantity
Real GDP - Answer GDP adjusted for inflation
GDP Deflator - Answer A measure of the price level, calculated by dividing nominal GDP by
real GDP and multiplying by 100
CPI - Answer (consumer price index) a measure of the overall cost of the goods and services
bought by a typical consumer
Inflation Rate - Answer CPI this year - CPI last year/CPI last year X 100
, Producer Price Index - Answer A measure of the cost of a basket of goods and services
bought by firms
Indexation - Answer the automatic correction by law or contract of a dollar amount for the
effects of inflation
Nominal Interest Rate - Answer It is the rate of interest before adjustment for inflation. The
real interest rate is the nominal rate of interest minus inflation. In the case of a loan, it is this
real interest that the lender receives as income. If the lender is receiving 8 percent from a loan
and inflation is 8 percent, then the real rate of interest is zero because nominal interest and
inflation are equal. A lender would have no net benefit from such a loan because inflation fully
diminishes the value of the loan's profit.
Real Interest Rate - Answer Nominal Interest Rate - Inflation Rate
Productivity - Answer (economics) the ratio of the quantity and quality of units produced to
the labor per unit of time
Physical Capital - Answer all human-made goods that are used to produce other goods and
services; tools and buildings
Human Capital - Answer the skills and knowledge gained by a worker through education and
experience
Natural Resources - Answer Materials or substances such as minerals, forests, water, and
fertile land that occur in nature and can be used for economic gain
Technological Knowledge - Answer society's understanding of the best ways to produce
goods and services
Diminishing Returns - Answer Stage of production where output increases at a decreasing
rate as more units of variable input are added.
catch-up effect - Answer the property whereby countries that start off poor tend to grow
more rapidly than countries that start off rich
Financial System - Answer the group of institutions in the economy that help to match one
person's saving with another person's investment
Mankiw Questions and Correct
Answers 2026 Updated.
Microeconomics - Answer Study of a single factor of an economy - such as individuals,
households, businesses, & industries - rather than an economy as a whole.
Macroeconomics - Answer Concentrates on the operation of a nation's economy as a whole.
GDP - Answer Gross Domestic Product- the total market value of all final goods and services
produced annually in an economy
Consumption - Answer (economics) the utilization of economic goods to satisfy needs or in
manufacturing
Investment - Answer Expenditures on (production of) new plant, equipment, and structures
(capital) in a given time period, plus changes in business inventories.
Government Purchases - Answer (G) expenditures by government for goods and services
that government consumes in providing public goods and for public (or social) capital that has a
long lifetime; the expenditures of all governments in the economy for those final goods and
services
Net Exports - Answer Exports minus imports
Nominal GDP - Answer Computed in current dollars - Measures Nominal Value - Change in
Price and Quantity
Real GDP - Answer GDP adjusted for inflation
GDP Deflator - Answer A measure of the price level, calculated by dividing nominal GDP by
real GDP and multiplying by 100
CPI - Answer (consumer price index) a measure of the overall cost of the goods and services
bought by a typical consumer
Inflation Rate - Answer CPI this year - CPI last year/CPI last year X 100
, Producer Price Index - Answer A measure of the cost of a basket of goods and services
bought by firms
Indexation - Answer the automatic correction by law or contract of a dollar amount for the
effects of inflation
Nominal Interest Rate - Answer It is the rate of interest before adjustment for inflation. The
real interest rate is the nominal rate of interest minus inflation. In the case of a loan, it is this
real interest that the lender receives as income. If the lender is receiving 8 percent from a loan
and inflation is 8 percent, then the real rate of interest is zero because nominal interest and
inflation are equal. A lender would have no net benefit from such a loan because inflation fully
diminishes the value of the loan's profit.
Real Interest Rate - Answer Nominal Interest Rate - Inflation Rate
Productivity - Answer (economics) the ratio of the quantity and quality of units produced to
the labor per unit of time
Physical Capital - Answer all human-made goods that are used to produce other goods and
services; tools and buildings
Human Capital - Answer the skills and knowledge gained by a worker through education and
experience
Natural Resources - Answer Materials or substances such as minerals, forests, water, and
fertile land that occur in nature and can be used for economic gain
Technological Knowledge - Answer society's understanding of the best ways to produce
goods and services
Diminishing Returns - Answer Stage of production where output increases at a decreasing
rate as more units of variable input are added.
catch-up effect - Answer the property whereby countries that start off poor tend to grow
more rapidly than countries that start off rich
Financial System - Answer the group of institutions in the economy that help to match one
person's saving with another person's investment
