1. What is the difference between nominal GDP and real GDP? How are they calculated? - Nominal GDP is the value of all final goods and services produced in a country in a given year, measured at current prices. Real GDP is the value of all final goods and services produced in a country in a given year, measured at constant prices of a base year. Nominal GDP is calculated by multiplying the quantities of final goods and services by their current prices and adding them up. Real GDP is calculated by multiplying the quantities of final goods and services by their base year prices and adding them up. - Rationale: This question tests the students' understanding of the concepts and formulas of nominal and real GDP, which are important indicators of economic performance and growth. 2. What is the difference between cyclical unemployment and structural unemployment? Give an example of each. - Cyclical unemployment is the unemployment that results from fluctuations in aggregate demand or business cycles. It occurs when there is insufficient demand for labor at the current wage rate. Structural unemployment is the unemployment that results from changes in the structure of the economy, such as technological progress, globalization, or shifts in consumer preferences. It occurs when there is a mismatch between the skills or locations of workers and the requirements or locations of jobs. An example of cyclical unemployment is when workers are laid off during a recession due to low demand for their products or services. An example of structural unemployment is when workers lose their jobs due to automation or outsourcing to other countries. - Rationale: This question tests the students' understanding of the types and causes of unemployment, which are important for analyzing the labor market and designing policies to reduce unemployment. 3. What is the difference between expansionary fiscal policy and contractionary fiscal policy? Give an example of each. - Expansionary fiscal policy is a policy that increases government spending or decreases taxes to stimulate aggregate demand and economic activity. Contractionary fiscal policy is a policy that decreases government spending or increases taxes to reduce aggregate demand and economic activity. An example of expansionary fiscal policy is when the government increases spending on public infrastructure or cuts income taxes to boost consumption and investment. An example of contractionary fiscal