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• • • • • • Formulas for Macro AP GDP = C + I + G + X – M MPC = 1 – MPS Spending multiplier = 1/MPS or 1/(1-MPC) Real GDP = nominal GDP/price index Monetary multiplier = 1/RRR Total addition to banking system = 1st loan x money multiplier + initial deposit IF IT’S NEW $ • Amt. of $ a bank can loan = excess reserves = total reserves – (RRR x checkable deposits) • Real interest rate = nominal interest rate – expected inflation rate • Balanced budget multiplier is when change in G = change in taxes; change in GDP = 1 x change in G or change in T • Comparative advantage: output (OOO); input (IOU) • Unemployment rate = # of unemployed/total labor force • Price index = P market basket in yr. 2/ P market basket in yr. 1 • Okun’s law: GDP gap (difference between actual and potential GDP) = 2 times the difference between unem. Rate and NRU