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MIdterm#2 Macro

QuestionAnswer
What is the formula for GDP per capita in terms of productivity and employment? Y/POP = (Y/N) × (N/POP)
What is the Rule of 72 for calculating years to double GDP (or an investment)? Years to Double = 72 / (Growth Rate or Interest Rate)
What is the Value of the Marginal Product (VMP)? VMP = Price of Output × Marginal Product of Labor
What determines labor market equilibrium? Labor demanded = Labor supplied at a given real wage
What is the basic definition of savings? Saving = Current Income - Spending on Current Needs
What is the formula for the savings rate? Saving Rate = Saving / Income
What is the formula for net worth? Net Worth = Assets - Liabilities
What is the relationship between wealth, savings, and capital gains/losses? Change in Wealth = Saving + Capital Gains - Capital Losses
What is the real interest rate formula? r = i - π real interest rate = nominal interest rate - inflation
What is the national income identity? Y = C + I + G + NX
What is the formula for national savings? S = Y - C - G
What is the formula for private savings? S(private) = Y - T - C
What is the formula for public savings? S(public) = T - G
Combine public and private savings to get national savings. S = S(private) + S(public) = (Y - T - C) + (T - G) = Y - C - G
What is the government budget surplus formula? Surplus = T - G
What is the government budget deficit formula? Deficit = G - T
What is the relationship between savings and investment in equilibrium? S = I
What is the reserve-deposit ratio formula? Reserve–Deposit Ratio = Bank Reserves / Total Deposits
What is the formula for bank deposits in a fractional-reserve system? Bank Deposits = Bank Reserves / Desired Reserve–Deposit Ratio
What is the formula for the total money supply (currency and deposits)? Money Supply = Currency + Deposits
What happens in an open-market purchase of bonds by the Fed? Bank reserves ↑ → Deposits ↑ → Money supply ↑
What happens in an open-market sale of bonds by the Fed? Bank reserves ↓ → Deposits ↓ → Money supply ↓
What is the key formula for money creation in fractional-reserve banking? Deposits = Reserves / Reserve Ratio
What is the money supply expansion process simplified? Money Multiplier = 1 / Reserve Ratio
Created by: user-1998584
 

 



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