Current Economic Issues and Statistical Analysis
What the domain tests
Current Economic Issues and Statistical Analysis tests inflation, unemployment, growth, fiscal and external imbalances, sustainable development, and basic statistical tools used to interpret data: measures of central tendency, index numbers, and correlation.
Core rules
- Inflation: a sustained rise in the general price level. CPI measures retail prices; WPI measures wholesale prices. Real income falls if prices rise faster than nominal income.
- Unemployment: measured by usual status and current weekly status; it includes people willing to work but not finding work.
- Index numbers: compare a variable with a base year; a simple price index = (current price ÷ base price) × 100.
- Central tendency: mean = sum ÷ number of observations; median is the middle value; mode is the most frequent value.
- Correlation: measures the direction and strength of association, not causation.
Worked example
For observations 10, 20, 30, 40, 100, the mean is 200/5 = 40, while the median is 30. The mean is pulled upward by the outlier 100. If the CPI rises from 120 to 126, inflation = (126 − 120)/120 × 100 = 5%. If nominal income rises 8% and prices rise 5%, real income rises by about 2.9%, not 3%.
Traps that cost marks
Do not treat a rise in one price as general inflation. Do not compare CPI and WPI weights as if they were identical. Do not say correlation proves causation. Do not use the mean for skewed data without noting the median. Do not quote current statistics without checking the latest official release.