calculation-reference

CFA Level I Economics Calculations

Elasticity, GDP, inflation, exchange rates, and monetary-policy calculations for CFA Level I.

TL;DR

Economics calculations focus on percentage changes, elasticity, real versus nominal values, GDP components, currency quotes, and interest-rate parity relationships.

Formula Reference

Price elasticity of demand

Elasticity = % change in quantity demanded / % change in price

Use absolute value when discussing magnitude.

Fisher relation

Nominal rate approximately = real rate + inflation

Exact relation is (1 + nominal) = (1 + real)(1 + inflation).

GDP expenditure approach

GDP = C + I + G + (X - M)

Consumption plus investment plus government spending plus net exports.

BA II Plus Keystrokes

Use percent-change arithmetic for elasticity.
Use STO/RCL for GDP component totals.
For exact Fisher relation, multiply growth factors and subtract 1.

Worked Example

Quantity falls 6 percent when price rises 3 percent.
Elasticity = -6 / 3 = -2.
Demand is elastic in magnitude.

Common Mistakes

Using dollar changes instead of percentage changes for elasticity.
Forgetting imports are subtracted in GDP.
Mixing direct and indirect exchange-rate quotes.

Related Guides

CFA Level I Economics Formula Sheet - Public economics formula sheet for elasticity, GDP, inflation, FX, and parity relationships.
BA II Plus: Effective Annual Rate Step by Step - Calculate effective annual rate from stated annual rate and compounding frequency.
Time Value of Money Calculations on the BA II Plus - CFA Level I TVM reference for present value, future value, annuities, perpetuities, and BA II Plus inputs.