These are original Marlbridge practice questions, not past exam questions. All questions use Valdoria, a fictional country whose currency is the valda (VD), and other fictional countries whose figures are given in valdas; all figures are fictional. The rubrics are a suggested Marlbridge rubric to help you check your work; they are not an official scoring guideline. Assumptions: a four-function calculator is enough; round percentages to 2 decimal places.
Question 1 (multiple choice · foundation)
Which of the following is a limitation of GDP as a measure of a country’s total production?
- (A) GDP does not include the value of meals that parents cook at home for their families.
- (B) GDP does not count the steel bought by car makers separately from the cars.
- (C) GDP does not include pensions paid by the government.
- (D) GDP includes goods produced in the country and sold to foreign buyers.
Answer and explanation
Answer: (A). Home cooking is real production, but it is a nonmarket activity with no recorded price, so GDP misses it. GDP therefore understates total production.
- (B) is correct accounting. Steel is an intermediate good; its value is already inside the price of the cars.
- (C) is correct accounting. Pensions are transfer payments; nothing is produced in return.
- (D) is correct: exports are produced in the country, so they belong in its GDP.
Question 2 (multiple choice · core)
Valdoria’s GDP is VD 630 billion and its population is 18 million. What is GDP per person?
- (A) VD 35
- (B) VD 3,500
- (C) VD 35,000
- (D) VD 350,000
Answer and explanation
Answer: (C). VD 630 billion = VD 630,000 million. 630,000 million ÷ 18 million = VD 35,000.
- (A) divides 630 by 18 without converting billions to millions; it is out by a factor of 1,000.
- (B) is out by a factor of 10, a slip in converting the units.
- (D) is also out by a factor of 10, in the other direction.
Question 3 (multiple choice · core)
Which event would most likely increase Valdoria’s measured GDP while reducing the well-being of its people?
- (A) A storm destroys homes, and households spend heavily on rebuilding them.
- (B) More people volunteer at food banks in their spare time.
- (C) Workers choose a shorter working week and spend more time with their families.
- (D) Households grow more of their own vegetables and buy fewer from shops.
Answer and explanation
Answer: (A). The rebuilding is new production, so it adds to GDP. But it only replaces homes that existed before the storm, and people lost the use of their homes in the meantime, so well-being is lower than before.
- (B) has no effect on GDP (volunteering is a nonmarket activity) and probably raises well-being.
- (C) probably lowers GDP (fewer hours worked), while the extra leisure may raise well-being. It is the opposite combination.
- (D) lowers measured GDP (fewer market sales), even though the vegetables are still produced, and it does not make people worse off. It is not the combination asked for.
Question 4 (multiple choice · core)
Between two years, Valdoria’s GDP grows by 2% and its population grows by 3%. Which statement about GDP per person is correct?
- (A) It rises by about 5%.
- (B) It rises by 2%, because only GDP affects living standards.
- (C) It falls by about 1%.
- (D) It falls by 3%.
Answer and explanation
Answer: (C). GDP per person changes by about 2% − 3% = −1%. Exactly: 1.02 ÷ 1.03 = 0.9903, a fall of 0.97%. Output grew more slowly than the number of people sharing it.
- (A) adds the two growth rates. A bigger population spreads the same output more thinly, so it lowers GDP per person.
- (B) ignores population, which is the reason for using GDP per person.
- (D) ignores the growth in GDP.
Question 5 (constructed response · core)
Tomas is a builder in Valdoria. In 2026 he does VD 8,000 of repair work for neighbours, paid in cash, and does not report it to the tax authorities. He also repairs the roof of his own house; hiring a builder for this job would have cost VD 1,500.
(a) State the effect of each activity on Valdoria’s measured GDP. (b) Calculate the value of the production that GDP misses, and explain why each part is missed. (c) In 2027 the government makes it easier to declare small cash jobs, and Tomas reports the same VD 8,000 of work. Explain what happens to measured GDP and to actual production.
Model answer and suggested Marlbridge rubric
(a) Neither activity adds to measured GDP.
(b) GDP misses VD 8,000 + VD 1,500 = VD 9,500 of production. The VD 8,000 is a market transaction, but it is hidden, so it is part of the informal (underground) economy. The roof repair is a nonmarket activity: Tomas does it for himself, so there is no sale and no price.
(c) Measured GDP rises by VD 8,000, but actual production does not change: Tomas does the same work as before. The rise in GDP reflects better measurement, not more output.
| Point | What earns it |
|---|---|
| 1 | Neither activity counted in measured GDP |
| 1 | VD 9,500 of production missed |
| 1 | Cash work identified as the informal (underground) economy |
| 1 | Roof repair identified as nonmarket (no market transaction) |
| 1 | Measured GDP rises by VD 8,000 while actual production is unchanged |
Question 6 (constructed response · core)
Lunera and Norvia are fictional countries. Their figures have been converted into valdas.
| Lunera | Norvia | |
|---|---|---|
| GDP | VD 900 billion | VD 700 billion |
| Population | 30 million | 25 million |
| Average hours worked per week | 48 | 36 |
| Share of income received by the richest 10% of households | 45% | 25% |
(a) Calculate GDP per person in each country. (b) Which country has the higher GDP per person, and by what percentage? (c) Using the data, explain two reasons why the people of Lunera might not have a higher standard of living than the people of Norvia.
Model answer and suggested Marlbridge rubric
(a) Lunera: 900,000 million ÷ 30 million = VD 30,000. Norvia: 700,000 million ÷ 25 million = VD 28,000.
(b) Lunera, by (30,000 − 28,000) ÷ 28,000 × 100 = 7.14%.
(c) Any two of:
- Leisure. Lunerans work 48 hours a week against 36 in Norvia, a third more. GDP gives no value to free time, so Lunera’s slightly higher output is bought with much less leisure.
- Distribution. The richest 10% receive 45% of income in Lunera but only 25% in Norvia. GDP per person is an average; a typical Luneran household may receive less than a typical Norvian one.
- A reason that goes beyond the data, such as more home production or a larger informal economy in Norvia, earns credit only if it is clearly explained as a possibility.
| Point | What earns it |
|---|---|
| 1 | Both GDP-per-person values correct |
| 1 | Lunera higher by 7.14% (dividing by Norvia’s value) |
| 1 | First reason identified from the data |
| 1 | First reason explained: why GDP does not capture it |
| 1 | Second reason identified and explained |
A reason must be linked to the limits of GDP. “Lunera works harder” with no link to leisure earns no point.
Question 7 (constructed response · stretch)
In 2025 a Valdorian couple lives with an elderly parent. One partner has a paid job; the other stays at home and cares for the parent full time. A paid carer would cost VD 18,000 a year. In 2026 the second partner takes a paid job earning VD 26,000 a year, and the family hires a carer for VD 18,000 a year. Assume each person’s pay equals the value of what they produce.
(a) Calculate the change in measured GDP from this family’s decisions. (b) Calculate the change in the actual production of goods and services. (c) Explain why the two answers differ. (d) Explain why the family’s well-being may not rise by as much as measured GDP suggests.
Model answer and suggested Marlbridge rubric
(a) Two new market transactions are recorded: the new job (VD 26,000) and the paid care (VD 18,000). Measured GDP rises by 26,000 + 18,000 = VD 44,000.
(b) The care was produced in both years; only who provides it changed. The new output is the second partner’s work: VD 26,000.
(c) In 2025 the care was a nonmarket activity, so GDP missed it. In 2026 the same care is bought in a market, so it is counted. Measured GDP growth is overstated by VD 18,000, the value of production that simply moved from the home into the market.
(d) The family has less free time, because both partners now work for pay. The parent may also value care from a family member more than care from a stranger. Neither the lost leisure nor the change in the quality of care appears in GDP.
| Point | What earns it |
|---|---|
| 1 | Measured GDP rises by VD 44,000 |
| 1 | Actual production rises by VD 26,000 |
| 1 | Explains that the care was nonmarket in 2025 and is counted only once it is bought |
| 1 | States the overstatement of VD 18,000 |
| 1 | One valid well-being point (lost leisure, or quality of care) linked to what GDP leaves out |
How did you do?
- Q1 wrong: re-read “Exclusions by design are not limitations” in the study guide.
- Q2, Q4 or Q6(a)–(b) wrong: redo Worked example 1, GDP per person, and check your units.
- Q3 or Q7 wrong: revisit Worked example 2 and the sections on nonmarket transactions, leisure and the environment.
- Q5 wrong: revisit “The informal (underground) economy”.
- Q6(c) wrong: revisit the sections on leisure and on how income is shared.
Then tick off the topic checklist.