Economics Flashcards
“Up-the-bid and multiply, down the ask and divide”
when performing exchange calculations
Cross Rates w/ Bid-Ask Spreads
(A/C)bid = (A/B)bid * (B/C)bid
(B/C)bid = 1/(C/B)ask
Value of a forward contract prior to expiration
Vt = [(FPt-FP) * Contract Size] / ( 1 + r*(days/360))
where,
r= interest rate
Covered Interest Rate Parity
F = [( 1 + Ra(days/360)) / (1 +Rb(days/360))] * Spot
Forward Premium
F-S0 = S0 * (days/360)/(1+Rb(days/360))(Ra-Rb)
Domestic Fisher Relation
Rnominal = Rreal + E(inflation)
International Fisher Relation
RnominalA - RnominalB = E(inflationA) - E(inflationB)
Expansionary Monetary Policy
i.r. decreases»_space; capital investment decreases»_space; domestic currency
Expansionary Fiscal Policy
Gov’t borrowin Increases»_space; Interest Rate increases»_space; Foreign Investment»_space; Domestic Currency Increases
Change in Price of Stock Market = ChangeinGDP + Change in Earnings/Change in GDP + Change in Price of Stock Market/ChangeinEarningsofStockMarket
…
Cobb Douglass Function
Y = T * K^alpha*L^(1-alpha)
where, T = total factor productivity K = Capital L = Labor alpha = share of output to capital 1-alpha = share of output to labor
Marginal Product of Capital
MPK = [(alphaY)/K] ——> alpha = (MPKK) / Y
Labor Productivity Growth Rate
= Growth rate due to technological change + growth rate due to captial deepening
= “better tech + more tech”
Growth Accounting Relation
Delta(Y) / Y = Delta(A) / A + alpha * (delta(K)/K) + (1-alpha)*(delta(L)/L)
which states,
G.R. in potential GDP = LR G.R. of Tech + alpha(LR G.R. of Capital) + (1-alpha)(delta(L)/L)
Labor Force Participation
labor force / working age population
