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MacroEcon Formulas
Formulas used in basic macroeconomics
| Question | Answer |
|---|---|
| GDP formula | Disposable Income + Net Taxes |
| Slope of line | Change in vertical distance / change in horizontal distance |
| PPF Production Possibilities Frontier | curve represents boundary between inefficient use of resources and unattainable goals |
| Bottom left of PPF | Inefficient use of resources |
| Top left of PPF | Unattainable goals |
| Disposable Income | Gross income - Taxes + transfer payments |
| Net Taxes | Taxes - Transfer Payments |
| GDP via Expenditures | C + I + G + (X-M)Consumer Spending + Investments + Gov't Spending + (Exports - Imports) |
| GDP via Income | W + R + I + PWages + Rents + INTEREST + Profits |
| Net Domestic Product | GDP - depreciation |
| Real GDP | GDP adjusted for inflation |
| Nominal GDP | GDP using values at time of production "just the figures" |
| GDP Price Index | Nominal GDP / Real GDP x 100Used to compare GDP in different years |
| Rate of Percentage | Current year - Base Year = AnswerAnswer / Current Year = Rate |
| Leakage from economy | Savings + Net Taxes + Imports |
| Injection into economy | Investments + Gov't Spending + Exports |
| Unemployment rate | number of unemployed / labor force |
| Labor force | number of people working and looking for work |
| Labor force participation rate | number in labor force / total population |
| MPC Marginal Propensity to consume | change in consumption / change in incomeHow much more would you consume, given a certain increase in income? |
| MPS Martinal Propensity to save | change in saving / change in incomeHow much more would you save, given a certain increase in income? |
| Simple Spending Multiplier | 1/MPS = 1/(1-MPC) MPS and MPC will always together equal "1" |
| Simple Spending Multiplier is used to | calculate effect of a certain increase in spending |
| Simple Money Multiplier | 1/(1/Rate) |
| Simple Money Multiplier is used to | calculate effect of a certain change in rate of spending |
| Real GDP demanded | Change in GDP x 1/(1-MPC) or-MPC x change in Net Tax x 1/(1-MPC) |
| Real GDP demanded formula is used to | calculate effect on GDP of a change in spending or taxation |
| Assets | Liabilities + Net Worth |
| Equation of Exchange | Money Supply x Velocity = Price Level x Y GDP |
| Equation of Exchange is used to | measure how well money is circulating in economy |
| Velocity | Price Level x Y GDP / Money SupplyMust get Velocity figure before using Equation of exchange |
| Velocity is used to | calculate how many times on average a dollar changes hands in a year |
| Total Spending | Money x Velocity |
| Total Receipts | Price Level x Y GPD |
| Effects of an Increase in Money Supply | Money Supply UpInvestments UpAgg Demand UpGDP UpInterest Rates Down |
| Simple Money Multiplier | change in fresh reserves x 1/rate |
| To measure purchasing power in a particular year | 100/CPI for example 100/CPI of 208 = .48c A 2009 dollar will buy what you could have bought for .48 in 1984 (or whatever year you're looking at) |
Created by:
mmc223
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