Formulas

Question 1

Provide the formula for the equilibrium consumption function

Answer 1

C = a + b(Y-T)

a = autonomous consumption
b = MPC
(Y - T) = disposable income

Question 2

Provide the formula for aggregate demand

Answer 2

AD = AS

C = a + b(Y-T)
AD = C + I + G [+(x-m)]

Question 3

What is the formula for disposable income?

Answer 3

YD = Y - T

Question 4

Provide the formula for public savings

Answer 4

S(public) = T - G

**if negative then it’s a budget deficit

Question 5

Provide the formula for the multiplier without tax

Answer 5

k = 1/(1 - MPC)

Question 6

Provide the formula for multiplier with tax

Answer 6

a = 1/1 - MPC(1 - T)

Question 7

Provide the formula for private savings

Answer 7

S(private) = Y - T - C or (YD - C)

Question 8

Provide the formula for nominal GDP

Answer 8

**current year
Q x P = nominal GDP

Question 9

Provide the formula for real GDP

Answer 9

**base year
Q x P = real GDP

Question 10

Provide the formula for the labour force

Answer 10

L.F = employed + unemployed

Question 11

Provide the formula for the unemployment rate

Answer 11

U.R = (unemployed/labour force) x 100

Question 12

Provide the formula for GDP per capita

Answer 12

Real GDP / population

Question 13

Provide the formula for the CPI

Answer 13

[(cost of CPI basket at current price) / (cost of CPI basket at base)] x 100

Question 14

Provide the formula for the inflation rate

Answer 14

[(CPI this year - CPI last year)/CPI last year] x 100