Mega terms Flashcards
effective annual rate
(1+stated rate/m)^m - 1
Present Value of perpetuity
PMT/(I/Y)
Geometric Mean
((1+R1)(1+R2)(1+R3)…(1+RN))^1/n
Harmonic Mean
N/Summation(1/Xi)
Mean Absolute Deviation
(Summation|Xi-X(mean)|)/n
Population Variance
Summation (Xi-mean)^2/N
Sample Variance
Summation (Xi-mean)^2/(N-1)
Chebyshev’s inequality
1-(1/k^2)
CV
Standard Deviation of x/Average value of x
P(A|B)
P(AB) = P(A|B) * P(B) = P(B|A) * P(A)
P(A or B)
P(A) + P(B) - P(AB)
Cov1,2
(Summation(Rt,1-R1)(Rt,2-R2))/(n-1)
Var(Rp)
wiwjCov(Ri,Rj)
Choosing when order doesn’t matter from subset r
n!/(n-r)!r!
Choosing when order does matter from subset r
n!/(n-r)!
For discrete uniform distribution
P(X=x) = (n!/((n-x)!x!))p^(x)(1-p)^(n-x)
SFRatio
E(Rp)-RT/stdevp
CI when variance is known and unknown
Z when variance is known t when variance is unknown
Type I error
the rejection of the null hypothesis when it is actually true. The alpha is P(Type I error)
Type II error
the failure to reject the null hypothesis when it is actually false False negative and power of test is 1-P(Type II)
paired T-test
t = (x1-x2)/((s^2p/n1)+(s^2p/n2))^1/2 where s^2p=(n1-1)s1^2 + (n2-1)s2^2 / (n1+n2-2)
Degrees of freedom for t-test
((s1^2/n1)+(s2^2/n2))^2/((s1^2/n1)^2/n1) + (s2^2/n2)^2/n2)
When to use a t-test
to test if two independent or dependent populations have equal means and when populations are normally distributed
When to use Chi-Squared test and F-test
To test one population variance use Chi-square and for two populations use F-statistic
How do you calculate elasticity
% change in quantity demanded/(% change in price/related good/income)
Breakeven quantity of product
P=ATC and TR=TC
When should it shut down
TR < TC (long run) TR < TVC (short run)
Order firms from most competetive to least competetive
Perfect Competition, Monopolistic Competition, Oligopoly, and Monopoly
Real GDP
Quantity produced in year t times price of good in year t-5
GDP
Consumption + Business Investment + Government Purchases + (Exports-Imports)
Shifts in the Aggregate Demand Curve
- Increase in consumers’ wealth 2. Business expectations 3. Consumer expectation of future income 4. High capacity utilization 5. Expansionary monetary policy 6. expansionary fiscal policy 7. Exchange rate 8. global economic growth
Shifts in SR Aggregate Supply Curve
- Labor Productivity 2. Input Prices 3. Expectations of future output prices 4. Taxes and government subsidies 5. Exchange rates
Shifts in the Long-Run Aggregate Supply Curve
- Increase in the supply and quantity of labor 2. increase in the supply of natural resources 3. Increase in the stock of physical capital 4. Technology
Production function
Y = A x f(L, K)
Growth in potential GDP
Growth in labor force + growth in labor productivity
Growth in potential GDP
Growth in technology + WL(growth in labor) + WC(Growth in Capital)
Neoclassical model
Shifts are driven by technology, and the economy tends toward full employment
Keynesian school/New
Shifts are due to business expectations/Input prices are sticky
Monetarist
Due to the amount of money supply
New classical
Real Business Cycle Theory
Money Multiplier
1/reserve requirement
Fisher Effect
Rnom = Rreal + E[I]
Current Spending vs. Capital Spending
Refers to government purchases of goods and services on an ongoing basis vs. temporary spending on infrastructure
Fiscal Multiplier
1/1-MPC(1-t)
Opportunity Cost
OC of a = Output of B/Output of A whoever has the least OC
Current Account
Merchandise and Services, Income Receipts, and Unilateral Transfers
Capital Account
Capital Transfers, Sales and Purchase of non-Financial Assets
Financial Account
Government owned assets abroad and Foreign-owned assets in the country
Real Exchange Rate
Nominal Exchange Rate x (CPI Base currency/CPI Price Currency)
Forward Exchange Rate
Forward/Spot = (1 + interest rateprice)/(1+ interest ratebase currency)
Marshall Lerner
Wxex+WM(em-1) > 0 x=exports m=imports
Equation of Exchange
Money Supply x Velocity = price x Real Output
corr1,2
Cov1,2/(stdev1*stdev2)
continuously compounded return
CCR = ln (1+HPR) = ln (ending value/beginning value)
When to use the t-test
When population variance is unknown and either normal or nonnormal
Substitution vs. Income effect
Substitution of x for y and income effect for the amount that is left. Substitution is always positive income can be positive or negative
GDP Budget
G-T = (S-I)-(X-M)
Richardian vs. H-O model
one factor of production (labor) vs. two factors of production (capital and labor)
