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MacroEcon Formulas

Formulas used in basic macroeconomics

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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