Economics Inquiry, Reasoning and Interpretation
What you must know cold
This domain tests whether you can read economic evidence and argue from it. You need to interpret data presented in tables, graphs and short extracts: identify trends, calculate percentage changes and growth rates, distinguish real from nominal values, and recognise index numbers. You must also be able to explain causation versus correlation, identify assumptions behind a model, and evaluate policy using criteria such as effectiveness, efficiency, equity and time lags. Familiarity with the structure of an extended response - thesis, evidence, analysis, evaluation, judgement - is essential.
Traps that appear in questions
- Describing a graph without interpreting it. "The line rose" earns little; "unemployment fell as growth accelerated, suggesting a lagging relationship" earns more.
- Confusing real and nominal figures when inflation is present.
- Confusing correlation with causation, particularly in cross-country comparisons.
- Ignoring the counter-argument. Evaluation marks usually require weighing strengths against limitations.
- Failing to reach a judgement when the question says "evaluate" or "discuss".
Rule of thumb
Use a PEEL paragraph: Point, Evidence (data from the stimulus), Explanation (mechanism), Link (back to the question). For evaluation, add a limitation and a conditional judgement - "this is effective provided that…".
Worked example
A table shows nominal GDP rising 6 per cent while the price index rises 4 per cent. Real growth is approximately 6 − 4 = 2 per cent (or 1.06/1.04 − 1 ≈ 1.9 per cent). A strong response states the calculation, notes that the approximation overstates real growth slightly, and interprets the result: living standards measured by output rose modestly, though distributional effects are unknown.