These ten questions use fictional economies and mix the five lessons in inflation and unemployment. They run from easier to harder. Write full working before opening each answer, and use a calculator only for the divisions.
Questions
1. A price index rises from 140 to 147. Calculate the percentage change.
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Change = 147 − 140 = 7. 7 ÷ 140 = 0.05. The answer is 5%.
2. In the base year a basket costs RM600. It now costs RM750. Find the index.
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750 ÷ 600 × 100 = 125. Prices are 25% higher than in the base year.
3. An index rises from 125 to 140. A student says “inflation was 15%”. Correct the statement.
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The change is 15 points, but the percentage is 15 ÷ 125 = 0.12, so inflation was 12%.
4. The index is 200 in year 1, then inflation is 6% in year 2 and 3% in year 3. Find the index in each year. Did prices fall in year 3?
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Year 2: 200 × 1.06 = 212. Year 3: 212 × 1.03 = 218.36. Prices did not fall. Inflation slowed from 6% to 3%, but the index still rose from 212 to 218.36. This is disinflation.
5. The index in 2025 is 110 and 2026 inflation is 10%. Find the 2026 index.
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110 × 1.10 = 121.
6. Name the type of unemployment: (a) a nurse changing hospitals who is between jobs for six weeks, (b) a fruit-picker without work after the harvest ends, (c) a factory worker whose plant closes permanently because the product is now made by machines elsewhere, (d) a shop assistant laid off when national spending drops in a downturn.
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(a) frictional, (b) seasonal, (c) structural, (d) cyclical.
7. In a town 570,000 people are employed and 30,000 are unemployed. Find the labour force and the unemployment rate.
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Labour force = 570,000 + 30,000 = 600,000. Rate = 30,000 ÷ 600,000 × 100 = 5%.
8. Using question 7, 5,000 unemployed people stop looking for work. Calculate the new rate to one decimal place. Did employment change?
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Unemployed = 25,000. Labour force = 595,000. Rate = 25,000 ÷ 595,000 ≈ 0.04202, so 4.2%. Employment is still 570,000, so no jobs were created. The rate fell because people left the labour force.
9. A worker’s pay rises from RM2,400 to RM2,448 while prices rise 4%. Calculate the percentage rise in pay and the approximate real change.
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Pay rise = 48 ÷ 2,400 = 2%. Real change = 1.02 ÷ 1.04 = 0.9808, so real pay falls by about 1.9%.
10. In a fictional economy, years with higher spending on umbrellas also have more traffic delays. A report says umbrellas cause delays. Give two reasons the claim is not supported and describe the likely cause.
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First, correlation does not show cause. Second, a third factor is more plausible: rainy weather raises umbrella purchases and slows traffic. A short sample could also be coincidence. The conclusion should say the data are consistent with a shared cause, not that umbrellas cause delays.
If you got these wrong
| Error you made | Go to |
|---|---|
| Treating points as percent, or dividing by the wrong base (Q1 to Q3, Q5) | Interpret an index change |
| Saying prices fell when only the rate fell (Q4) | Distinguish a price level from its rate of change |
| Wrong type or wrong labour-force base (Q6 to Q8) | Explain different unemployment mechanisms |
| Money change read as real change (Q9) | Compare effects on hypothetical households |
| “Proves” instead of “is consistent with” (Q10) | Separate correlation from a claimed cause |
Record each repeated mistake in the mistake log and retest queue. The percentage-base explorer and the ratios tool help rebuild the arithmetic.
If one error type keeps returning even after revising its lesson, a teacher in online one-to-one Economics tuition can watch you work a fresh problem and spot the step that fails. For current examination details, check the Cambridge IGCSE Economics 0455 page.