. Grade inflation is widespread; college students receive higher grades on tests

Question

. Grade inflation is widespread; college students receive higher grades on tests and exams today for work that would have received lower grades in the past. One recent study found that 41% of students had grade averages of A-minus or higher in 2009, compared to just 7% in 1969, In other words, grades improve while actual learning does not. Employers often use grades and college degrees as signals in the job market, where there is asymmetric information (information available to employers and private information of employees on their productivity differ). What effect would grade inflation have on the effectiveness of college degrees and grades as signals?

Explanation / Answer

Grade inflation will lead to the decrease of real values of better grade. As found in the study 41% students had an average grade of A- or more in 2009 as compared to the 7% in 1969. This shows that the no. of people having better grades increased manifolds in the current years; thus the availability or supply of such people have increased. This will lead to decreased real value and less weightage will be given to these grades while selecting an employee.

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