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S6 Economics | Inflation and Unemployment Paper 4 (Common-Error Retry)
S6 Economics | Inflation and Unemployment Paper 4 (Common-Error Retry)
The fourth paper drills the recurring slips: reading the index as the inflation rate, dividing the unemployed by total population, and comparing differences instead of rates.
Attempt first, mark afterwards Allow about twenty minutes; write down the denominator before pressing the keys.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 items |
| Suggested time | About 20 minutes |
| Difficulty mix | Foundation 4 · Intermediate 3 · Challenge 2 · Error redo 1 |
| Chapter | Chapter: S6 Economics | Inflation and Unemployment |
| Level | S6 (Secondary 6) Economics |
02 Questions (10 items)
- FoundationThe base-year CPI is 100. The same basket cost $480 last year and $528 this year. What is this year’s CPI?
- FoundationFrom the previous item, what is the inflation rate from last year to this year?
- FoundationIn a place the population aged 15 or over is 6,000,000, the labour force is 3,600,000 and 180,000 people are unemployed. What is the unemployment rate?
- FoundationThe nominal interest rate is 5.5% and inflation over the same period is 2.5%. What is the real interest rate?
- IntermediateA worker on $25,000 a month gets a 6% rise to $26,500 while the CPI goes from 100 to 110. How does the real wage change?
- IntermediateIn the same place 180,000 people were unemployed; if 25,000 of them give up searching and leave the labour force, what is the new unemployment rate?
- IntermediateAn economy’s Phillips curve is pi = 9 – 0.6 u. What is inflation when unemployment is 5%?
- ChallengeOn the same curve, what is inflation when unemployment is 15%%, and what does that point represent?
- ChallengeExpected inflation rises from 3% to 5% and the short-run Phillips curve shifts up by 2 percentage points. At 6% unemployment, inflation moves from 5.4% to what?
- Error redoRetry item: the CPI falls from 125 to 120 and someone answers “a fall of 5%”. What is the correct rate of change?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | 110 | CPI = 528 divided by 480, times 100 = 110. |
| 2 | 10% | The rate is the change in the index: (110 minus 100) divided by 100 gives 10 per cent. |
| 3 | 5% | Unemployment rate = unemployed divided by labour force = 180,000 divided by 3,600,000, which gives 5 per cent; the denominator is not total population. |
| 4 | 3% | Real rate is roughly the nominal rate minus inflation: 5.5 minus 2.5 = 3 per cent. |
| 5 | It falls by 3.64% | Real wage = 26,500 times 100 divided by 110 = 24,090.91, which is 3.64 per cent below $25,000; equivalently 1.06 divided by 1.10 minus 1. |
| 6 | 4.34% | The labour force falls to 3,575,000 and the unemployed to 155,000, giving 4.34 per cent; the rate drops although nobody has gained a job. |
| 7 | 6% | pi = 9 minus 0.6 times 5 = 6, so inflation is 6 per cent. |
| 8 | 0%, so the natural rate implied by this curve is 15% | pi = 9 minus 0.6 times 15 = 0; the unemployment rate at which inflation is zero is the natural rate implied by the curve. |
| 9 | 7.4% | On the old curve u = 6 gives 9 − 0.6 × 6 = 5.4; after a 2-point upward shift it is 7.4 per cent, which is a shift of the curve, not a movement along it. |
| 10 | A fall of 4% (deflation of 4%) | (120 minus 125) divided by 125 times 100 = -4 per cent; the wrong answer uses the new index 120 as the denominator. |
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.
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