These ten questions use five skills from output growth and living standards: real versus nominal, per-person measures, causal chains, indicators and averages. They run from easier to harder.
Use a calculator, round to one decimal place where asked, and write out your working before opening each answer. A mistake log and retest queue helps you track what to retry.
Questions
Q1 (easy). In a fictional economy, nominal GDP rises from 500 to 560 and the price index rises from 100 to 112. Calculate nominal growth and real GDP in the second year.
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Nominal growth = (560 − 500) ÷ 500 × 100 = 12%. Real GDP = 560 ÷ 112 × 100 = 500. Real growth is 0%, so the entire rise was price changes.
Q2. A worker’s monthly wage rises from V$2,000 to V$2,184. The price index rises from 100 to 104. Find the real wage in the second month and the percentage change in the real wage.
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Real wage = 2,184 ÷ 104 × 100 = V$2,100. Change = (2,100 − 2,000) ÷ 2,000 × 100 = 5%.
Q3. Real GDP is 3,000 million and the population is 1.5 million. The next year real GDP is 3,150 million and the population is unchanged. Calculate real GDP per person in each year and the percentage change.
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Year 1: 3,000 ÷ 1.5 = 2,000. Year 2: 3,150 ÷ 1.5 = 2,100. Change = 100 ÷ 2,000 × 100 = 5%.
Q4. A fictional country’s real GDP and population both rise by 3%. What happens to real GDP per person, and what does that say about living standards?
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Real GDP per person is unchanged, because the numerator and denominator grow at the same rate. The average person has no more output than before, so on this measure living standards have not risen, although the economy is larger.
Q5. Write a causal chain of at least four links explaining how a new rail link in the fictional country of Tolvane could raise real GDP.
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Sample: The rail link cuts the time taken to move goods from farms to cities. Firms spend less on transport and spoilage, so more goods reach customers. Lower costs allow firms to produce and sell more with the same workers, so output per worker rises. If the extra output is sold, real GDP rises. A condition: this depends on the line being used and maintained.
Q6. Country X has real GDP per person of US$9,000 and life expectancy of 70 years. Country Y has US$7,500 and 76 years. Which has the higher living standard? Give a balanced answer.
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On income, X is ahead by 1,500, which is 1,500 ÷ 7,500 × 100 = 20% higher. On health, Y is ahead by 6 years. A single winner cannot be named from these data. Limits: GDP per person is an average and hides distribution, and life expectancy reflects wider conditions. A judgement depends on what “living standard” is taken to include, so more indicators are needed.
Q7. Six households in a fictional town earn B$900, B$1,000, B$1,100, B$1,200, B$1,300 and B$9,500 a month. Calculate the mean and the median, and say which better describes a typical household.
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Total = 15,000. Mean = 15,000 ÷ 6 = B$2,500. Median = (1,100 + 1,200) ÷ 2 = B$1,150. The median better describes a typical household, since five of six households earn less than the mean.
Q8 (harder). In Brenmoor (five households earning B$1,200, B$1,500, B$1,800, B$2,100 and B$13,400), the mean rises by 10% because the highest-income household receives all the extra income. Calculate the new mean, the extra income received by that household, and the new median.
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Old mean = 20,000 ÷ 5 = 4,000. New mean = 4,000 × 1.10 = 4,400. New total = 4,400 × 5 = 22,000, so extra = B$2,000 to the highest-income household (now B$15,400). The median stays B$1,800. The average rose by 10% but the typical household gained nothing.
Q9 (harder). Real GDP rises from 800 million to 840 million. Population rises from 400,000 to 408,000. Calculate real GDP growth, population growth and the percentage change in real GDP per person.
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GDP growth = 40 ÷ 800 × 100 = 5%. Population growth = 8,000 ÷ 400,000 × 100 = 2%. Per person: 800 million ÷ 400,000 = 2,000. 840 million ÷ 408,000 = 2,058.8. Change = 58.8 ÷ 2,000 × 100 = 2.9% (to 1 d.p.). Per-person growth is lower than GDP growth because population also grew.
Q10 (hardest). A fictional country has nominal GDP of V$1,200 million, a price index of 120 (base year = 100) and a population of 600,000. Calculate real GDP per person in base-year prices, and explain why nominal GDP per person would overstate living standards compared with the base year.
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Real GDP = 1,200 ÷ 120 × 100 = V$1,000 million. Real GDP per person = 1,000 million ÷ 600,000 = V$1,666.7 (to 1 d.p.). Nominal GDP per person = 1,200 million ÷ 600,000 = 2,000, which is 20% higher. The difference is price changes, not extra goods and services, so the nominal figure overstates what people can actually buy compared with the base year.
If you got these wrong
| Where it went wrong | What to review |
|---|---|
| Q1, Q2, Q10: used nominal figures as real, or multiplied by the index instead of dividing | Distinguish nominal from real measures |
| Q3, Q4, Q9: forgot population or divided the wrong way | Calculate a per-person measure |
| Q5: the chain skipped links or ended with “so growth rises” | Explain a growth source using a causal chain |
| Q6: ranked on one indicator or listed limits without a judgement | Compare living-standard indicators with limitations |
| Q7, Q8: treated the mean as every household’s income | Avoid treating a national average as every household’s experience |
For percentage slips, the percentage-base explorer and the ratios with interpretation limits tool can help.
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