Economic passages with figures

Why the vocabulary matters

Bocconi describes the passages in the reading area as involving economic topics, for example GDP, the deficit and inflation, and says they may contain numbers and data. You are not tested on economics as a subject, but a passage can only be read correctly if its terms are understood correctly, and several everyday words mean something precise in economics. Most wrong answers on data-rich passages come from treating two related quantities as if they were the same.

Terms that are easy to confuse

Term	What it measures	Easily confused with
GDP	The value of everything an economy produces in a period	GDP per person (GDP divided by population)
Nominal	Measured at the prices of the time	Real: adjusted for changes in prices
Inflation rate	How fast prices are rising	The price level itself
Deficit	How much more a government spends than it collects in one year (a flow)	Debt: the total owed, built up over many years (a stock)
"% of GDP"	An amount divided by GDP	The amount itself
Share	A part as a fraction of a total	The size of the part

Falling inflation is not falling prices

If inflation falls from 6% to 3%, prices are still rising, only more slowly. Prices fall only when inflation is negative. An option such as "prices fell in 2024", after a passage reporting that inflation fell to 3%, reads a rate as if it were a level.

Deficits add to debt

A deficit is the gap in one year; the debt is the stock it adds to. A government can cut its deficit sharply and still see its debt rise, because a smaller deficit is still new borrowing. Whether the debt ratio (debt divided by GDP) rises is a separate question: it also depends on how fast GDP grows.

Nominal and real

Nominal figures include the effect of rising prices; real figures remove it. For small rates, a good approximation is:

$$\text{real growth} \approx \text{nominal growth} - \text{inflation}$$

Nominal GDP up 5% with inflation at 3% means real GDP up about 2%. The same rule applies to wages: a 4% pay rise with 6% inflation is a fall in real wages of about 2%. The exact calculation divides the multipliers ($\frac{1.05}{1.03} \approx 1.019$), but the approximation is almost always enough to choose an option.

Percentage points and percent

When the figure is itself a rate or a ratio, a change can be reported two ways. Unemployment rising from 8% to 10% is a rise of 2 percentage points, and a rise of 25% in the rate. Debt rising from 60% to 66% of GDP is a rise of 6 points, or of one tenth. Read which one the question asks for.

Rates compound

Inflation of 9%, then 5%, then 3% does not add up to 17% over three years. Each year's rise is taken on a higher price level, so the yearly multipliers are multiplied: $1.09 \times 1.05 \times 1.03 \approx 1.179$, a rise of about 17.9%. When an option claims a cumulative figure that is a plain sum of yearly rates, be suspicious.

Reading the passage with the data in mind

• On the first read, note which quantities are given and in which unit: percent of GDP, euros, percentage growth, index points.
• When two parties argue about the same figures, check whether they measure the same thing over the same period. Often both are right about different things: one about a single year, the other about a cumulative total.
• Before choosing an option that makes a numerical claim, do the arithmetic, even roughly. Calculators are not allowed on the test, so practise the multiplications by hand.