CEA Macroeconomic Indicators 3

Question 1

Which of the following best describes the output gap?

Accepted Answer

The gap between actual GDP and potential GDP

Answer

The output gap measures how far actual economic output deviates from the economy's non-inflationary potential.

Question 2

Okun's Law describes an empirical relationship between:

Accepted Answer

Unemployment rate changes and GDP growth

Answer

Okun's Law estimates that for every 1 percentage point rise in unemployment above its natural rate, GDP falls roughly 2% below potential.

Question 3

What does a rising velocity of money (V) imply, holding the money supply constant?

Accepted Answer

Nominal GDP must rise

Answer

From the quantity theory (MV = PQ), if M is constant and V rises, then the product PQ (nominal GDP) must increase.

Question 4

Which of the following is a LAGGING economic indicator?

Accepted Answer

Commercial and industrial loans outstanding

Answer

Commercial and industrial loans outstanding typically peak after the economy has already begun to recover, making it a lagging indicator.

Question 5

A country runs a current account deficit. According to the national income identity, this implies:

Accepted Answer

Investment exceeds national saving

Answer

CA = S − I; a current account deficit means domestic investment exceeds national saving, requiring foreign capital inflows to finance the gap.

(CEA) Certified Economic Analyst Practice Test