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GDP and National Income Paper 2: Intermediate
GDP and National Income Paper 2: Intermediate
Into growth rates and price adjustment: switching between nominal and real, the deflator, per-head growth, two-year averages, and multiplying growth factors.
Direct answers Answers and explanations for all ten questions
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 |
| Suggested time | 20 |
| Difficulty mix | Foundation 3 · Intermediate 3 · Challenge 3 · Error redo 1 |
| Chapter | Chapter: DSE Economics GDP and National Income |
| Level | Paper 2 (intermediate) |
02 Questions (10 items)
- FoundationItem 1: nominal GDP rises from 1 000 to 1 100. What is the nominal growth rate?
- FoundationItem 2: nominal GDP is 1 100 and real GDP is 1 000 in the same year. Find the deflator.
- FoundationItem 3: real GDP is 2 500 hundred million with a population of five million. Find real GDP per head.
- IntermediateItem 4: nominal GDP grows 9 per cent while prices rise 5 per cent. Find real growth.
- IntermediateItem 5: GDP grows 7 per cent while population grows 1.5 per cent. Find growth in GDP per head.
- IntermediateItem 6: real GDP rises from 800 to 968 over two years. Find the average annual growth rate.
- ChallengeItem 7: real GDP falls from 1 210 to 1 089. Find the percentage fall.
- ChallengeItem 8: nominal GDP is unchanged while the deflator rises from 100 to 115. How much does real GDP change?
- ChallengeItem 9: real GDP per head grows 3 per cent and population grows 2 per cent. Find GDP growth.
- Error redoError 10: with inflation at 8 per cent and nominal GDP growth at 8 per cent, a student answers “real growth of 8 per cent”. What is wrong?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | 10.000000000000009 per cent, the change divided by the original figure. | Nominal growth is before prices are removed and is not the same as real growth. |
| 2 | 110.00000000000001, since the deflator is nominal divided by real, multiplied by one hundred. | A move from one hundred to one hundred and ten means prices rose a tenth on average. |
| 3 | 5.0 ten-thousand dollars. | Per-head figures suit living-standard comparisons, though they hide distribution. |
| 4 | About 3.81 per cent, dividing the growth factors rather than subtracting the rates. | Convert to growth factors first, then divide, to keep the error small. |
| 5 | About 5.42 per cent; growth per head always trails total growth because population also rises. | The faster the population grows, the wider the gap between total and per-head growth. |
| 6 | 10.0 per cent: two years require a square root, not dividing the total growth by two. | Halving 21 per cent gives 10.5, which overstates the annual rate. |
| 7 | 9.999999999999998 per cent, the fall divided by the original figure. | For a fall the denominator is the earlier value, not the later one. |
| 8 | About -13.04 per cent, a real fall of roughly 13.04 per cent. | With nominal output flat and prices higher, real purchasing power must fall. |
| 9 | About 5.06 per cent, multiplying the two growth factors rather than adding them. | Adding gives 5 per cent; the product differs slightly, so read what the question wants. |
| 10 | Real growth is roughly zero, since the whole nominal gain is cancelled by higher prices. | Always remove the price effect before comparing nominal with real. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
Write the growth factors first, multiply or divide, subtract one last; any other order goes wrong.Tutor Registration →
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