Midterm 1 Formulas

Question 1

Marginal Cost/Benefit, Economic Surplus(Profit) Formula

Answer 1

Marginal Cost and Benefit: C/B - C/B(-1)

Profit = Total Benefits - Total Costs

Question 2

Gross Domestic Product (GDP) Formula

Answer 2

Market value of all FINAL goods and services in a given year and country.

GDP = C + I + G + NX (exp-imp)

Question 3

Nominal and Real GDP Formula

Answer 3

Nominal = P*Q

Real = ((Pt + P(t-1)) / 2) * Q

%Change in Nom = %Change in Real + %Change in Prices

Question 4

Rule of 70 Formula

Answer 4

(Years it takes to double something like GDP)

=70 / (annual growth rate)

Question 5

Compound Annual Growth Rate Formula

Answer 5

CAGR = (ending value/beginning value) ^ (1/number of years) - 1

Question 6

Labour Force Participation Rate Formula

Answer 6

(employed + unemployed) / (working age population) * 100

Question 7

Unemployment Rate Formula

Answer 7

(Unemployed / Labour Force) * 100

Question 8

Inflation Rate Formula

Answer 8

((Price level this year - Price level last year) / Price Level last year ) * 100

Question 9

GDP Deflator Formula

Answer 9

(Nominal GDP / Real GDP) * 100

Question 10

Comparing Dollars Over Time Formula

Answer 10

Today’s $ = another time’s $ * (price level today/ price level in another time)

Question 11

Interest Rate Formula

Answer 11

Real = Nominal Interest Rate - Inflation Rate