Macroeconomic formulas/MCQ points Flashcards
How do you calculate increase in real GDP…
increase in Real GDP = increase in nominal GDP - rate of price inflation
(Answer is in % and may be a minus %).
How do you calculate latest year real GDP?
Latest year nominal GDP / latest year price index (x 100)
(Answer is in £)
changes in real GDP are expressed with index numbers.
How do you calculate current year economic growth?
Current year economic growth = current year real GDP - previous year real GDP / previous year nominal GDP x 100
How do you calculate MPC?
change in consumption / change in income
What’s Fisher’s Equation of Exchange?
money supply x velocity of money = price level x aggregate transactions.
MV = PT
How is GDP per capita calculated?
Total GDP / Population size
How do you calculate real exchange rate?
nominal exchange rate x price lvl in a country / price lvl abroad
How do you calculate the multiplier from the MPC?
1/1-MPC
e.g.
-> Govt. injection £100m,
-> Everytime income is generated, 80% of that income is spent,
-> So, £80m will be spent, (cycle goes on)
-> MPC = 0.8
-> Then, 1/1-0.2 = 5
> Can be shown by a right shift from AD1 -> AD3 on a Keynasian curve
How do u calculate the multiplier from the MPW?
1/MPW
How to calculate inflation rate…
new - orig /orig (x100)
Answer is in 5%!
How to calculate GNI…
GDP + net factor income
Calculating net factor income =
Income earned by domestic FoPs abroad - Any income earned by foreign FoPs domestically
How to calculate green GDP…
GDP - environmental costs
HOW IS nominal GDP calculated with a table/values?
!!!
Current year NGDP = (P of product A current year x Q of product A current year) + (P of product B current year x Q of product B current year)
(annotate ahead)
nominal GDP
How is Real GDP calculated with a table/values?
!!!
current year RGDP = (P of product A base year x Q of product A current year) + (P of product B base year x Q of product B current year)
Note: Base year RGDP = Base year NGDP
How is the GDP deflator calculated with a table/values?
!!!
NGDP / RGDP x 100
How do you calculate inflation rate with a table/values?
!!!
GDP deflator (current year) - GDP deflator (previous year) / GDP deflator (previous year) x 100
(Leave out finding base year)
How do you calculate economic growth rate?
!!!
RGDP (current year) - RGDP (previous year) / RGDP (previous year) x 100
(Leave out finding base year)
Cost of basket in current year calculation…
!!!
P(a) x Q(b) of product A + P(a) x (b) of product B
CPI calculation
!!!
cost of basket (current year) / cost of basket (base year) x 100
(base year CPI = 100)
Calculating inflation rate with CPI…
Current CPI - Previous CPI / Previous CPI x 100
(Leave finding base year inflation rate)
How to calculate yield…
(For a bond)
Yield = coupon / market price x 100
(Bond’s yield is the annual return an investor will get from the bond)
The lower the bond price, the higher the yield and vice versa.
Calculate terms of trade index…
terms of trade index = index of average price of exports / index of average price of imports (x100)
Current account balance formulas…
-> Balances for trade = imports - exports
-> Balances for investment income and transfers = debits - credits
-> For the overall current account balance, add up all balances (positive balance is a surplus, negative balance is a deficit)
Formula for calculating inflation rate…
(Change in CPI/Original CPI) x 100
(+100 to adapt to base year)
A left shift in AD leads to…
(UK financial crisis)
- Negative output gap and cyclical unemployment
(With additional LRAS curve and SRAS curve)
AD calculation…
C + I + G + (X-M)
(Same calculation for calculating real GDP via the expenditure method)
NGDP calculation…
(Income method)
Adding up factor incomes e.g. wages, salary etc
NGDP output method…
- Add up the final value of all goods and services in an economy
Calculating real GDP…
NGDP / Price index x 100
(Price index could be CPI or GDP deflator)
How to calculate the GDP deflator…
NGDP / RGDP x 100
Change in national income…
Initial injection x multiplier
Calculate unemployment rate
No. of unemployed / labour force x 100
Calculate index number…
(For converting prices to index)
Raw number / raw number in a base year x 100
(Raw number = number you want to convert)
Percentage change…
change - orig / orig x 100
Calculate a weighted price index…
(e.g a weighted CPI)
- Convert prices to index
- Multiply index prices by weights
- Add up weighted prices
- Divide by total number of weights
Calculate real interest rate…
Nominal interest rate - inflation rate
Calculate taxable income
Income - Tax free allowance
Calculate average rate of tax
Tax paid / income x 100
Calculate marginal rate of tax…
Change in tax paid / change in income x 100
Calculate the bond yield…
Coupon / market price x 100
Calculate the capital ratio
Capital / loans x100
Calculate the liquidity ratio
Current assets / Current liabilities x 100
