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Macro/Microeconomics > Formulas > Flashcards

Formulas Flashcards

1
Q

slope

A

vertical distance/change between 2 points / horizontal distance/change between 2 points

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1
Q

compounding economic growth

A

value = principle * (1 + %rate) ^ # of years

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2
Q

compound interest

A

value = principle * (1 + %rate) ^ # of years

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3
Q

market output when externalities exist

A

social demand = market demand +/- externalities (increases or decreases market output or supply)

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4
Q

measures of income flow sequence

A 
gross domestic product (GDP)
- depreciation
= net domestic product (NDP)
\+ net foreign factor income
= national income (NI)
- indirect business taxes, corporate profits, interest payments, Social Security taxes
\+ transfer payments, capital income
= personal income (PI)
- personal income taxes
= disposable income (DI)
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5
Q

real GDP

A

real GDP in year x = (nominal GDP in year x / price index) * 100

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6
Q

value of GDP

A

GDP = C consumption expenditure + I investment expenditure + G government expenditure + (X exports - M imports)

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7
Q

net domestic product (NDP)

A

NDP = GDP - depreciation

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8
Q

national income (NI)

A

NI = NDP + net foreign factor income

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10
Q

disposable income (DI)

A

DI = personal income - personal taxes

DI (Yd) = consumption (C) + saving (S)

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11
Q

price index

A

price index = price increase with base of 100% (3.3% increase is 103.3% / 100 = 1.033)

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12
Q

inflation

A

value = principle / (1 + %rate) ^ # of years

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13
Q

price level increase

A

price level increase = (CPI year 1 - CPI year 2) / CPI year 1

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14
Q

labor force participation rate

A

labor force

participation rate = # of working age population working or seeking employment / # of working age population x 100

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15
Q

% change in CPI

A

% change in CPI = item weight * % change in price of item

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16
Q

real interest rate

A

real interest rate = nominal interest rate - anticipated rate of inflation

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17
Q

real value of savings at year-end

A

real value of savings at year end = savings balance / (price level at year-end / price level at year-start)

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18
Q

average propensity to consume (APC)

A

APC = total consumption (C) / total disposable income (Yd)

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19
Q

total consumption

A

C = autonomous consumption (a) + income-dependent consumption

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20
Q

consumption function (Cf)

A

C = a + (b * Yd) (autonomous consumption + marginal propensity to consume * disposable income

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21
Q

consumer savings (S)

A

S = Yd - C (disposable income - consumption)

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22
Q

actual investment

A

actual investment = desired investment + undesired investment

23
Q

multiplier (M)

A

M = 1 / (1 - MPC or marginal propensity to consume)

24
Q

total change in spending

A

total change in spending = multiplier * initial change in aggregate spending

25
Q

total change in spending

A

total change in spending = multiplier * new spending injection

26
Q

cumulative increase (horizontal shift) in AD

A 
cumulative increase (horizontal shift) in AD = new spending injection (fiscal stimulus) + induced increase in consumption
= multiplier * fiscal stimulus (new spending injection)
27
Q

desired fiscal stimulus

A

desired fiscal stimulus = AD shortfall / multiplier

28
Q

initial increase in consumption

initial consumption injection

A

initial increase in consumption = MPC * tax cut

initial consumption injection = MPC * tax cut

29
Q

cumulative change in spending

A

cumulative change in spending = multiplier * initial change in consumption

30
Q

desired tax cut

A

desired tax cut = desired fiscal stimulus / MPC

31
Q

initial fiscal stimulus (injection)

A

initial fiscal stimulus (injection) = MPC * increase in transfer payments

32
Q

desired fiscal restraint

A

desired fiscal restraint = excess AD / multiplier

33
Q

cumulative reduction in spending

A

cumulative reduction in spending = multiplier * initial budget cut (fiscal restraint)

34
Q

desired increase in taxes

A

desired increase in taxes = desired fiscal restraint / MPC

35
Q

desired tax hike

A

desired tax hike = desired fiscal restraint / multiplier

36
Q

budget deficit

A

budget deficit = government spending - tax revenues > 0

37
Q

total budget balance

A

total budget balance = cyclical balance + structural balance

38
Q

reserve ratio

A

reserve ratio = bank reserves / total deposits

39
Q

required reserves

A

required reserves = required reserve ratio * total deposits

40
Q

excess reserves

A

excess reserves = total reserves - required reserves

41
Q

money multiplier

A

money multiplier = 1 / required reserve ratio

42
Q

potential deposit creation

A

potential deposit creation = excess reserves of banking system * money multiplier

43
Q

available lending capacity of banking system (unused lending capacity)

A

available lending capacity of banking system = excess reserves * money multiplier

44
Q

yield

A

yield = annual interest payment / price paid for bond

45
Q

real interest rate

A

real interest rate = nominal interest rate - anticipated inflation rate

46
Q

growth rate of total output

A

growth rate of total output = growth rate of labor force - growth rate of productivity

47
Q

labor productivity

A

labor productivity = total output / total employment

48
Q

growth rate of total output

A

growth rate of total output = growth rate of labor force - growth rate of productivity

49
Q

labor productivity

A

labor productivity = total output / total employment

50
Q

trade balance

A

trade balance = exports - imports

51
Q

current-account balance

A

current-account balance = trade balance + unilateral transfers

52
Q

capital-account balance

A

capital-account balance = foreign purchases of US assets - US purchases of foreign assets

53
Q

net balance of payments

A

net balance of payments = current-account balance + capital-account balance = 0

Macro/Microeconomics (18 decks)

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