CAIE A-Level Economics 4.4.3 Nominal vs real GDP growth

CAIE A-Level Economics 4.4.3 Nominal vs real GDP growth
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise separating nominal and real GDP growth by adjusting for inflation, constant prices and price index data in calculations.

How this is tested

  • calculate real GDP growth by removing inflation from nominal GDP changes
  • explain why real GDP gives a more meaningful growth comparison than nominal GDP
  • use price index data to convert nominal GDP into real GDP

Question 17

[Maximum number: 1]

GDP of a country measured at current market prices was $ 1000 bn in year 1. This had risen to $ 1100 bn in year 2.

Over the same period the general price level had risen by 5%.
What has happened to real GDP?

A

Real GDP fell by approximately 5%.

B

Real GDP fell by approximately 10%.

C

Real GDP rose by approximately 5%.

D

Real GDP rose by approximately 10%.