Macroeconomics 8th Edition by David Colander

Exercise 3

Grade inflation is widespread. In 1990, 81 percent of the students who took the SATs had an A or B average, but 40 percent of them scored less than 390 on the verbal SAT. Students' grades are increasing but what they are learning is decreasing. Some economists argue that grade inflation should be dealt with in the same way that price inflation should be dealt with-by creating a fixed standard and requiring all grades to be specified relative to that standard. One way to accomplish this is to index the grades professors give: specify on the grade report both the student's grade and the class average, and deflate (or inflate) the grade to some common standard. Discuss the advantages and disadvantages of such a proposal.