Formulae Flashcards
Present Value Formula
PV = FV/(1+i)^t
Future Value Formula
FV = PV(1+i)^t
GDP Deflator
Nominal GDP/Real GDP * 1000
Real GDP
Prices of base year, quantities of given year
Expenditure approach
C + G + I + X - IM
Income Approach
Profits + Wages + Interest payments + rent (for every firm summed)
CPI (From market baskets)
Market basket price given year / market basket price of base year (using quantities of base year, obv)
Real interest rate (Fisher equation)
Nominal interest rate - inflation rate
Real GDP growth rate from Nominal GDP growth rate and inflation rate
Nominal GDP growth rate - inflation growth rate
Productivity per worker (GDP/L)
A*F(K/L, H/L)
Productivity
GDP/employed
Production function estimate
A * (K/L)^1/3 * (H/L)^2/3
Rule of 70
Time for GDP to double = 70/growth rate
GDP (with national savings, closed economy)
GDP = C + G + S_national
S_National (open)
S_National = I + NX ||| also GDP - C - G = I + NX = S_National
Investment spending) vs private savings and co. Formula
I = S_private + (T - G) + (IM - X)
Inflation Rate
CPI year 2 - CPI year 1 / CPI year 1
Value of money after inflation
Real Value = Nominal Value/(1+inflation rate)
Money multiplier (accounting for people holding on to some amount of money)
(1 + CiC/CD)/(CiC/CD + R/CD)
CiC = Currency in circulation
CD = Chequable deposits
R = Reserves
∆Spending impact on GDP vs ∆Transfers
GDP change with ∆transfers = ∆GDP = ∆TRMPC(1/(1-MPC))
GDP change with ∆spending = ∆G*(1/(1-MPC))
The formula for money multiplier with currency in circulation
Money Multiplier formula:
(1+C)/(R+C)
C = Currency In Circulation / Chequable Deposits
R = Reserves / Chequable Deposits
So formula really equals
(1 + CiC/CD)/(R/CD + CiC/CD)
Calculate excess reserves given an amount of chequable deposits and reserve ratio
Total reserves - (reserve ratio * chequable deposits) = excess reserves
Average Growth Rate of GDP over multiple years, given some n increases
geometric mean: nth root of all n increases multiplied.
So if the GDP is 100 billion dollars in year 1, and it grows 2% in year 2, 3.5% in year 3:
100*(1+0.02)*(1.0.035) = actual growth average growth G -> 100*(1+G)^2 = 100*(1+0.02)*(1+0.035) G = sqrt((1+0.02)*(1+0.035))-1
GDP deflator
nominal/real * 100
Natural rate of unemployment
Frictional + structural = natural
Real income
Nominal income/price level
Real wage
Nominal wage/Price level
Aggregate production function
GDP = A * F(K,L,H) ||| L is labor force size
Savings_private
GDP - T + TR - C
Budget Balance
T - TR - G
Savings_national (open economy)
I + NFI
Unplanned inventory investment from GDP and AE_planned
GDP - AE_planned
Money supply (chequable only, no loans made yet)
Bank reserves/reserve ratio
Output gap
actual aggregate output - potential output / potential output * 100
Money multiplier with Tax
1/(1 - MPC*(1-t)) ||| t is the tax rate
Value of money after inflation
nominal value/(1+inflation rate)
Trade balance, national savings, domestic investment, taxes, and gov spending
TB = (S_national - I) + (T - G) ||| Note how that if gov spending is high enough, it forces a negative trade balance and/or smaller investment spending
