FINAL by <3 Flashcards
Formula and Use
Forward interest rate
Interest rate beginning in the future
“expected interest rate”
Long term interest rate (Liquidity premium theory)
Formula
Long term interest rate (expectation theory)
Formula and Use
Trade to GDP Ratio
How much of the GDP comes from Trades
Formula and Use
Point Price elasticity of Demand
How sensitive is demand to a change in price
Formula and Use
Point Price Elasticity of Supply
How sensitive is Supply to a change in price
Formula and Use
Arc Elasticity of Demand
How sensitive is demand to a change in price between two prices
Formula and Use
Income elasticity of Demand
- How sensitive demand is to changes in income
- Determine if goods are normal or inferior
Formula and Use
Cross-price elasticity of Demand
- Determine how sensitive demand is to changes in the price of another good
- Determine if goods are subsititutes or complements
Elastic demand
Elasticity>1
Inelastic demand
elasticity<1
Elasticity=1
Unit elastic
Passthrough formula
What portion of the tax is passed to the consumer
the side that is less elastic (steeper) will pay more of the tax
Formula and definition
Labour force
People working or looking for work
Formula
Unemployement Rate
Formula
Employment rate
Formula
Labour Force Participation rate
Earnings consists of:
Wage x Units of time= Earnings
Total compensation consists of:
Earnings+Benefits= Total compensation
Income consists of:
Total compensation+Unearned Income= Income
Formula and use
Marginal Product of Labour
Additional output that one more unit of labour will generate
Marginal Product of Capital
Additional output that one more unit of capital will generate
Marginal Revenue product of Labour
Amount of revenue one aditional worker generates
Profit Maximization of L
Profit is maximized if MR=MC
Payroll tax effect on the Labour Demand formula
Wage subsidies effect on the Labour demand formula
Marginal Rate of Technical Substitution
How much capital must be given up to get one more unit of labour (isoquant slope)
Marginal Rate of subsititution of Labour/ Indifference curve
Expected value/return
Risk preference
Average return of a gamble based on probabilites
Standard deviation
Risk Preference
Risk related to the gamble
Since you cant add st.deviations, find variance then square root
Formula
Variance
Formula+def
Expected utility
Utility a person expects to receive from an uncertain event
Formula
Insurance premium
Payout x probability of payout
Formula
Present value
Formula+defintion
Nominal Rate
Return/Interest rate unadjusted for inflation
Real return rate
Also called fisher equation
Return/Interest rate adjusted for inflation
Current Yield of a Coupon Bond
CY=Coupon/Current price
