Equations For Paper 3

Question 1

Real GDP

Answer 1

(Nominal GDP/Price index) x 100

Question 2

GDP Deflator (Or price index)

Answer 2

(Nominal GDP / Real GDP) x 100

Question 3

Nominal GDP

Answer 3

C+I+G+X-M

Or: (Real GDP x Price index) /100

Question 4

Gross national income

Answer 4

GDP + Net factor Income

Question 5

Green GDP

Answer 5

GDP- Environmental Costs

Question 6

Injection into circular flow of income

Answer 6

-Investment
-Government expenditure
-Exports

Question 7

Leakages / Withdrawals of Circular flow of Income

Answer 7

-Savings
-Taxes
-Imports

Question 8

Multiplier

Answer 8

1/1-Marginal propensity to consume

Or: 1/Marginal propensity to withdraw

Question 9

Change in national income

Answer 9

Initial injection x multiplier

Question 10

Accelerator effect

Answer 10

Rate of GDP growth which leads to increase in investment

Question 11

Budget deficit

Answer 11

When government expenditure > tax revenue within a year

Question 12

Budget surplus

Answer 12

When tax revenue > government expenditure within a year

Question 13

Unemployment rate

Answer 13

(Unemployed / Labour force) x 100

The labour force consists of the employed and the unemployed

Question 14

Index number

Answer 14

(Raw number / Base year raw number) x 100

Question 15

Weighted price index

Answer 15

(Sum of weighted price indices / Sum of weights)

The rate of inflation should be the value obtained minus 100