Macro Formula

Question 1

Nominal GDP

Answer 1

GDP deflator X real GDP

Question 2

Consumption function

Answer 2

C = c0 + c1(Yd)

Yd=(Y-T)

Question 3

Goods market (just c function)

Answer 3

Y = (1/1-c1) (c0+I+G-c1T)

Question 4

Multiplier

Answer 4

1/1-c1

Question 5

I function

Answer 5

I = b0 - b2i + b1Y

Question 6

C + I

Answer 6

C + I = c0-c1T + b0 -b2i + c1Y +b1Y

Slope = c1Y + b1Y

Question 7

Goods market equilibrium Y*

Answer 7

Y* = 1/1-c1-b1 [ c0-c1T+b0-b2i+G ]

Question 8

G multiplier

Answer 8

1/1-c1 (G2-G1)

Question 9

I multiplier

Answer 9

1/1-c1 (I2-I1)

Question 10

Tax multiplier

Answer 10

-c1/1-c1 (T2-T1)

Question 11

D checkable deposits (Dd)

Answer 11

Dd = (1-c) Md

Question 12

GDP deflator

Answer 12

= nominal GDP / real GDP X 100

Question 13

D reserves by banks (Rd)

Answer 13

Rd=θ(1-c)Md

Question 14

D central bank money (Hd)

Answer 14

Hd = [c+θ(1-c)]Md

Question 15

Md

Answer 15

Md=$YL(i)

=H[1/(c+θ(1-c))

Question 16

LM relation

Answer 16

L(i)=Md/$Y

M/P=YL(i)

Question 17

Overall supply of money

Answer 17

Central bank money X mm (1/(c+θ(1-c))

Question 18

Is relation

Answer 18

Y=C + I + G

Question 19

Gov bonds

Answer 19

I = maturity price / actual price -1

Question 20

AS

Answer 20

P=Pe(1+μ)F(u,z)

u=1-Y/L

–> P=Pe(1+μ)F(1-Y/L, z)

Question 21

Price setting

Answer 21

P=(1+μ)W
–> W/P=1/(1+μ)

Perfectly competitive μ=0, P=W
Less competition μ increases

Question 22

Wage setting

Answer 22

W/P= Pe/P F(u,z)

Question 23

Equilibrium in labour market (WS=PS)

Answer 23

Pe/P F(u,z) = 1/(1+μ)

Question 24

Natural level of output

Answer 24

Yn=Nn=L(1-Un)

Question 25

Employment level

Answer 25

N=L(1-u)

Question 26

Interest parity condition

Answer 26

(Ignores transaction costs and risk)

1+i(t))=(1+i*(t)) E(t)/Ee(t+1

Question 27

Real ε

Answer 27

E P / P*

P=p UK g £
P*=p USA g $
E= nominal exchange rate

Question 28

Relation domestic i + foreign i + expected rate depreciation of domestic currency

Answer 28

(1+i(t)) = (1+i *(t)) / [1+(Ee(t+1) - E)/E(t)]

Question 29

Approximation

Answer 29

i(t) ~ i*e - Ee(t+1) - E(t) / E(t)

i must be roughly equal to foreign i + depreciation rate of domestic currency
–> Ee(t+1) = E(t) then i(t) = i*(t)

Question 30

Exchange rate

Answer 30

E(t) = Ee(t+1) [1+i / 1+i*]

Question 31

Where to I?

Answer 31

1+i = 1+i* / 1+ [Ee(t+1) - E(t) / E(t)]

Question 32

Open economy D for domestic goods

Answer 32

Z = C+I+G-IM/ε+X

Question 33

IM

Answer 33

$IM(Y, ε)

Question 34

X

Answer 34

X(Y*, ε)

Question 35

Current exchange rate

Answer 35

E = 1+i / 1+i* X Ee

Question 36

Open economy: IS

Answer 36

Y=c(Y-T) + I(Y,i) + G + NX(Y, Y, 1+i/1+i Ee)

Question 37

Open economy: LM

Answer 37

M/P=YL(i)

Question 38

Saving

Answer 38

NX= S + (T-G) - I

S= I+G-T-IM/ε+X

Question 39

Inflation

Answer 39

π(t)=πe(t)+(μ+z)-αu(t)

As πe(t)=θπ(t-1) –> π(t)=θπ(t-1)+(μ+z)-αu(t

Question 40

Original Philips curve

Answer 40

π(t)=(μ+z)-αu(t)

Question 41

Modified Philips curve

Answer 41

π(t)-π(t-1)=(μ+z)-αu(t)

Question 42

Un - natural rate unemployment

Answer 42

Un = μ + z / α

NRU: π(t)-π(t-1)= -α(u(t)-un)

Question 43

Proportion labour contracts indexed (λ)

π(t)=?

Answer 43

π(t)-πe(t)= -α(u(t)-un)

π(t)=[λπ(t)+(1-λ)πe(t)] -α(u(t)-un)

Question 44

Okun’s law

Answer 44

u(t)-u(t-1) = β(g(yt) - g(y))

Question 45

Philips curve

Answer 45

π(t)-π(t-1)=

Question 46

AD (growth)

Answer 46

g(yt)=g(mt)-π(t)

Question 47

Demand for currency CUd

Answer 47

CUd=cMd