Pass the CPA Exam - Business Section - Economics

Introduction to Economics

The economics section, while one of the smaller parts of the exam, can be fairly difficult for accounting students. The concepts within can be foreign and many students have not taken economics classes since freshman or sophomore year. Keynesian economics appears to be the topic which is most useful.

Notes from my CPA Exam Study Session

Vocabulary

Gross Domestic Product (GDP) - The market value of goods and services produced inside a nations borders.
Nominal GDP - This is GDP unadjusted for inflation, and shown in the actual dollars.
Real GDP - This is GDP adjusted for inflation over time, so that it more accurately reflects true measurements between time periods.

Formulas

Real GDP Price Index (GDP Deflator) - This is the formula used to get real (inflation adjusted) GDP.

Real GDP = (Nominal GDP/GDP Deflator) * 100