Download The Formulas of Macro

The Formulas of Macro
Expenditure Approach to Real GDP
• Real GDP = consumption + investment + government spending + net exports
RGDP= C+ IG + G+ XN
Income Approach to Real GDP
• Real GDP = Rent + Wages + Interest + Profits
RGDP= r+ w+ i+ p
Labor Force
• LF= # Employed + # Unemployed
LF= E+ U
Labor Force Participation Rate
• Labor force participation rate —
LFPR=
Labor Force
Working Age Population
F
pop
Unemployment Rate
• UR=
#Unemployed
Labor Force
U
LF
UR= —
Inflation Rate (CPI is Consumer Price Index)
• Infl R—
(New CPI— Old CPI
x100
Old CPI
GDP Deflator
( Nominal GDP)
x 100
• GDP Defl =
Real GDP
Converting Nominal GDP to Real GDP
(Nominal GDP)
• RGDP= x100
CPI
Real Interest Rate
• Real interest rate = Nominal interest rate — Inflation rate
r%= i% —1C%
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Nominal Interest Rate
• Nominal interest rate = Real interest rate + Expected inflation rate
i% = r% + nexP%
Marginal Propensity to Save
• MPS—
Change in saving
Change in disposable income
Marginal Propensity to Consume
• MPC
Change in consumption
—
Change in disposable income
Spending Multiplier
1
1
• Multspend =1 — Ain or
MPS
Tax Multiplier
• Multtax =
1 PC —MPC
or
1 — MPC MPS
—
Money Multiplier
• Muft, =
1
required reserve ratio
Multiple Deposit Expansion
• Required reserve = amount of deposit x required reserve ratio
• Maximum amount a single bank can loan = change in excess reserves caused by a deposit
• Change in loans throughout banking system = initial change in excess reserves x Multiplier money
• Change in money supply = change in loans throughout banking system + $ amount of any OMOs
Monetary Equation of Exchange
• Money Stock x Income Velocity of Money = Nominal GDP
• Money Stock x Income Velocity of Money = Price Level x Real GDP
• MV= PQ MV= PV
Preparing for the AP Macroeconomics Exam
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