- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 10. Aggregate Output, Prices, and Economic Growth
- Subject 1. Gross Domestic Product

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**CFA Practice Question**

Given the following information, and measured in terms of 1990 prices, the real GDP in 2000 was ______.

Correct Answer: 6,000 billion

Real GDP for 2000 = Nominal GDP for 2000 x (GDP Deflator for 1990/ GDP Deflator for 2000) = $9000 x (120/180) = $6000

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**User Contributed Comments**
6

User |
Comment |
---|---|

jonan203 |
HP12C: 9000<enter><enter> 120<enter> 180<divide><times> = 6000 |

sailkanch |
Isnt Real GDP = (Nomoinal GDP/GDP Deflator)* 100 ? |

ankurwa10 |
the formula is --> Real GDP = Nominal GDP x 100 / GDP deflator. So, Real GDP x GDP deflator = Nominal GDP /100 I think I am confused now. |

Kevdharr |
Just divide the GDP deflator for a given year (120) by 100. Here, 120/100 = 1.2. Then multiply the nominal GDP for that same year (5,000) by 1.2. 5,000 * 1.2 = 6,000. |

greglong1 |
The trick here is that we are given nominal values for both years and the deflators are referencing a DIFFERENT base year (perhaps 1980 dollars). Typically on an exam you're just given a single base year and you don't need to do the ratio to standardize the deflators. In base year dollars, the 1990 GDP is 5,000/1.2 or $4,166 and the 2000 GDP is 9,000/1.8 or $5,000. 20% real growth from 1990, or $6000 in 1990 dollars. |

pigletin |
yes the formula is real = nom / deflator *100, this assumes 1990 is the base year, thus deflator is 1. but in this question, 1990 is not the base year. |