Principles of Macroeconomics: Final
Exam Review Questions and Answers
2026.
Major Goals of Economic Policy - Answer 1) Reduce Unemployment
2) Reduce inflation
3) Adequate economic growth
4*) Equitable income distribution
Real GDP - Answer Measures GDP utilizing the constant prices of a base year and GDP
deflator
Nominal GDP - Answer Measures GDP utilizing the current prices of all final goods and
services
Macroeconomic Tools - Answer ...
Why do we bother to calculate real GDP if we already have nominal GDP? - Answer Real GDP
provides a better understanding of the actual growth in the volume of output by removing price
changes (inflation)
GDP Deflator - Answer Nominal / Real x 100
Inflation Rate - Answer New price - old price / old price x 100
GDP - Answer Gross Domestic product- the total monetary value of all final goods and
services produced in a country within a year's time
Two methods of calculating GDP - Answer 1) Government asks the firms to inform through
receipts and invoices
2) income approach asks households once a year their wages, rent, profit
MPC - Answer Marginal propensity to consume- portion of additional income that an
individual consumes instead of saves. Change in C / Change in Y (income)
MPS - Answer marginal propensity to save- portion of additional income that an individual
saves. Change in S / change in Y (income)
Exam Review Questions and Answers
2026.
Major Goals of Economic Policy - Answer 1) Reduce Unemployment
2) Reduce inflation
3) Adequate economic growth
4*) Equitable income distribution
Real GDP - Answer Measures GDP utilizing the constant prices of a base year and GDP
deflator
Nominal GDP - Answer Measures GDP utilizing the current prices of all final goods and
services
Macroeconomic Tools - Answer ...
Why do we bother to calculate real GDP if we already have nominal GDP? - Answer Real GDP
provides a better understanding of the actual growth in the volume of output by removing price
changes (inflation)
GDP Deflator - Answer Nominal / Real x 100
Inflation Rate - Answer New price - old price / old price x 100
GDP - Answer Gross Domestic product- the total monetary value of all final goods and
services produced in a country within a year's time
Two methods of calculating GDP - Answer 1) Government asks the firms to inform through
receipts and invoices
2) income approach asks households once a year their wages, rent, profit
MPC - Answer Marginal propensity to consume- portion of additional income that an
individual consumes instead of saves. Change in C / Change in Y (income)
MPS - Answer marginal propensity to save- portion of additional income that an individual
saves. Change in S / change in Y (income)
