Equations Flashcards
MPC
MPC = (Change in consumption on domestic output)/(change in income)
MPW
Change in total withdraws / Change in Income
MPW and MPC Relationship
1 = MPC + MPW
Aggregate Demand
AD = C + I + G + Xn
Spending Multiplier
Spending Multiplier = 1/1-MPC = 1/MPW
Changes in Equilibrium GDP (Shift in AD curve)
spending multiplier * initial change in spending
GDP Deflator
Nominal GDP/Real GDP
Interest rate of Bond
Interest payment / price of bond
Reserve ratio
desired reserves/ deposits
Excess reserve
cash reserves - desired reserves
Money multiplier
1/reserve ratio
change in money supply
change in excess reserve * money multiplier
GDP expenditure equation
C + I + G + Xn(X-M)
Per Capita GDP
GDP/Population
Real Income
=Nominal Income/CPI (in hundredths)
Real GDP
= Nominal GDP/GDP Deflator (In hundredths)
Real Interest Rate
= Nominal Interest rate - rate of inflation
Nominal interest rate
= Desired real interest rate + inflation premium
Participation rate (%)
Labour force/Labour force population x 100%
Unemployment rate (%)
Unemployment in labour force/Labour force x 100%
Real expenditure
nominal expenditure/GDP Deflator
Real value of financial assets
Nominal value of asset/Price level(GDP Deflator)
Rule of 72: Number of Years =
72/annual percentage growth rate
Labour productivity
real output/total hours worked
Budget Surplus/ Budget Deficit
government revenue > or < government expenditure
Cyclical Unemployment
Unemployment - Natural Unemployment
Real GDP Growth
Nominal GDP Growth - Inflation
Desired Reserves
Total Deposits x desired reserve ratio
Maximum Credit Creation
Excess reserves x money multiplier
Cyclically Adjusted Budget Balance
The government Balance at full employment
