Measures of economic performance practice questions (A-Level Economics)

Sample questions

All 5 free A-Level Economics questions on this topic, from the free A-Level Economics Multiple Choice Questions with Answers. Each answer is behind its own toggle; the whole paper, its PDF and the full answer key are on the exam page.

1. Question 11 mark · Measuring inflation
   A simplified consumer price index has two categories: food, with a weight of 40 percent, and housing, with a weight of 60 percent. Over a year, food prices rise by 10 percent and housing costs rise by 5 percent. The rate of inflation measured by the index is:
   • A.
     7 percent
   • B.
     7.5 percent
   • C.
     15 percent
   • D.
     5 percent
   Show answerFrom the free A-Level Economics Multiple Choice Questions with Answers →
2. Question 21 mark · Real and nominal values
   Nominal wages rise by 3 percent in a year in which the consumer price index rises by 5 percent. Real wages have:
   • A.
     risen by 3 percent
   • B.
     risen by approximately 8 percent
   • C.
     fallen by 5 percent
   • D.
     fallen by approximately 2 percent
   Show answerFrom the free A-Level Economics Multiple Choice Questions with Answers →
3. Question 31 mark · Types of unemployment
   A coal mine closes as the economy shifts away from coal. Many of the miners lack the skills required by the growing industries in their region and remain unemployed for several years. This is an example of:
   • A.
     frictional unemployment
   • B.
     structural unemployment
   • C.
     cyclical (demand-deficient) unemployment
   • D.
     seasonal unemployment
   Show answerFrom the free A-Level Economics Multiple Choice Questions with Answers →
4. Question 41 mark · Measuring unemployment
   In a country, 30 million people are employed, 2 million are unemployed and actively seeking work, and a further 8 million people of working age are economically inactive. The unemployment rate is:
   • A.
     5 percent
   • B.
     6.67 percent
   • C.
     6.25 percent
   • D.
     25 percent
   Show answerFrom the free A-Level Economics Multiple Choice Questions with Answers →
5. Question 51 mark · Balance of payments
   A country's balance of payments for a year shows: exports of goods 400 billion, imports of goods 520 billion, exports of services 180 billion, imports of services 110 billion, net primary income +20 billion and net secondary income −30 billion. The current account balance is:
   • A.
     a deficit of 120 billion
   • B.
     a deficit of 60 billion
   • C.
     a deficit of 50 billion
   • D.
     zero: the account is balanced
   Show answerFrom the free A-Level Economics Multiple Choice Questions with Answers →

Key terms

The definitions and formulas A-Level Economics expects for measures of economic performance, typeset as they appear on the paper.

Economic growth and GDP

The rate of change of real GDP. Compare living standards with GDP per capita at purchasing power parity, and know the limitations: the hidden economy, inequality, non-marketed output and well-being.

Real and nominal values

Nominal values are at current prices; real values strip out inflation using a price index. Converting is a standard calculation.

$$\text{real value} = \frac{\text{nominal value}}{\text{price index}} \times 100$$

Inflation and the CPI

A sustained rise in the general price level, measured as the percentage change in the Consumer Prices Index, a weighted basket of goods and services. The RPI includes housing costs and is usually higher. Causes: demand-pull, cost-push, growth of the money supply.

$$\text{inflation rate} = \frac{CPI_t - CPI_{t-1}}{CPI_{t-1}} \times 100$$

Measures of unemployment

The claimant count (those receiving unemployment benefits) and the Labour Force Survey measure (the ILO definition: out of work, looking in the last four weeks, able to start in two). The LFS figure is higher and internationally comparable.

Types of unemployment

Cyclical (demand-deficient), structural (a mismatch of skills or location after industry decline), frictional (between jobs), seasonal and real-wage (wages held above equilibrium). The cause determines which policy works.

Balance of payments

The record of transactions with the rest of the world. The current account comprises trade in goods, trade in services, primary income and secondary income; a current account deficit is financed by the capital and financial accounts.

Index numbers

Values expressed relative to a base year set at 100, so percentage changes can be read directly. A weighted index multiplies each item's price change by its share of spending.

$$\text{index} = \frac{\text{value in year}}{\text{value in base year}} \times 100$$

Frequently asked questions

Other A-Level Economics topics

• Nature of economics and economic methodology
• How markets work: demand, supply, elasticity
• Market failure and government intervention
• Aggregate demand and aggregate supply
• National income, growth and the multiplier
• Macroeconomic objectives and policies
• Business growth, market structures and the labour market
• Globalisation, trade and exchange rates
• Poverty, inequality and development
• The financial sector

All A-Level Economics topics · A-Level Economics exam guide · All free practice exams