These seven questions are original, with invented towns, schemes and figures. Write your own answer first, then open the model answer.
Set a timer with the timed original practice session builder if you like. The habits behind these questions are introduced in reading national economic indicators carefully.
Questions 1 to 3: figures on a common basis
Question 1. A fictional chain’s sales are RM5.0 million in Year 1 (index 100) and RM5.4 million in Year 2 (index 104). Find the nominal and real changes in sales.
Answer
Nominal change: 0.4 ÷ 5.0 × 100 = 8%.
Real sales in Year 2: 5.4 ÷ 104 × 100 = RM5.192 million. Real change: 0.192 ÷ 5.0 × 100 = about 3.8%, which is 3.85% before rounding.
Most of the rise came from prices, and the real gain is under half the nominal gain.
Question 2. Fictional island arrivals are 80 000 in Year 1, 96 000 in Year 2 and 105 600 in Year 3. Find each year’s growth rate and write a sentence that compares them.
Answer
Year 2: 16 000 ÷ 80 000 × 100 = 20%. Year 3: 9 600 ÷ 96 000 × 100 = 10%.
Sentence: “The growth rate of arrivals halved from 20% to 10%, but arrivals still rose from 96 000 to 105 600, because the rate stayed positive.”
Question 3. Fictional Town U opened 150 new shops in three months and has 10 000 residents. Fictional Town V opened 360 in a full year and has 30 000 residents. Compare them on a full year per 1 000 residents.
Answer
Town U, full year: 150 × 4 = 600. Per 1 000 residents: 600 ÷ 10 = 60.
Town V: 360 ÷ 30 = 12.
Town U opened five times as many shops per 1 000 residents, assuming the first three months are a typical quarter. The raw figures, 150 and 360, suggested the reverse.
Questions 4 to 5: sort and correct
Question 4. Label each statement about a fictional town as Observed, Explained or Preferred.
- (a) Household spending rose from RM3 000 to RM3 150 a month.
- (b) The rise may be linked to a new market opening.
- (c) The town should build more markets.
- (d) Spending per household rose by 5%.
Answer
(a) Observed. (b) Explained, a possibility marked by “may be”. (c) Preferred, since it says what should be done. (d) Observed: 150 ÷ 3 000 × 100 = 5%.
Question 5. A student writes: “Inflation fell from 5% to 3%, so prices fell.” Correct it and give one number to show your reason.
Answer
A lower inflation rate means prices still rose, only more slowly. Prices fall only when the rate is negative.
Number: if the index is 105 after a 5% year and then rises 3%, it becomes 105 × 1.03 = 108.15. The index is higher, so prices rose.
Questions 6 to 7: limits and longer answers
Question 6. Fictional Country K reports an unemployment rate of 4% for one quarter. Fictional Country L reports 6% for a full year.
A student says Country L has the weaker labour market. What do you need to know before agreeing?
Answer
First, whether the two figures cover the same period. A one-quarter figure may not match a full-year figure if seasons matter.
Second, whether both countries count the labour force in the same way. Without these two checks, the comparison cannot be made fairly. The 2 percentage point gap may come from the method, not the labour market.
Question 7. A fictional town’s unemployment rate was 10% before a bus pass scheme and 8% a year later. A factory also opened that year. Write a short answer that describes the change and explains it without overclaiming.
Answer
Model answer: “The unemployment rate fell by 2 percentage points, from 10% to 8%, in the year after the scheme began. Cheaper travel may have helped job seekers reach employers. The factory that opened in the same year may also have added jobs. The figures do not show which of these, or what combination, caused the fall.”
This answer gives the observation with units, offers two possible explanations and marks the limit. It makes no policy recommendation, because none was asked for.
If you got these wrong
Questions 1 and 5 connect to distinguishing nominal change from real change and explaining why a rate can fall while the underlying level still rises. Questions 3 and 6 need identifying the population and period.
Questions 4 and 7 need separating a descriptive result from a policy preference. Record each slip in the mistake log and paper-error review.
For a teacher to go through your answers with you, see online one-to-one Economics tuition.