Midterm 2 Equations

Question 1

National Saving

Answer 1

Sg + Sp

Question 2

Private Savings

Answer 2

Households: Y - T - C

Question 3

Public Savings

Answer 3

Gov’t: T - G
(+) surplus
(-) deficit

Question 4

Closed economy equation

Answer 4

Y = C + I + G

Question 5

Real Interest Rate

Answer 5

nominal interest rate - inflation rate

Question 6

Production function

Answer 6

Y = A * F
y=ouput
A=technology
F=(Labor, physical capital (K), human capital (H), natural resources)

Question 7

Money multiplier

Answer 7

1/R -> initial deposit (aka reserves) * multiplier

Question 8

reserves

Answer 8

reserves = deposits X reserve ratio

Question 9

velocity of money

Answer 9

mv = p x y

y=real GDP
p x y = nominal GDP

Question 10

fisher effect

Answer 10

r = I - pi

I = nominal interest rate
r = real interest rate
pi=inflation rate

Question 11

nominal interest rate

Answer 11

real interest rate + inflation rate

Question 12

GDP deflator

Answer 12

(nominal GDP/ real GDP) x 100

Question 13

Inflation equation

Answer 13

(CPIcurrent - CPIbase) /CPIbase x 100

Question 14

After tax nominal interest rate

Answer 14

nominal interest rate x (1-tax rate)

Question 15

After tax real interest rate

Answer 15

nominal interest rate x (1-tax rate)

Question 16

money supply

Answer 16

currency + deposits

Question 17

total deposits

Answer 17

total reserves/R

Question 18

relative price

Answer 18

price of x/price f/price of y

Question 19

real capital gain

Answer 19

nominal capital gain - nominal capital gain x inflation rate

nominal capital gain = selling price - cost basis of sold shares