Unit #2 Equations Flashcards
GDP using the expenditure approach
GDP = C + I + G + (X-M)
GDP using the income approach
GDP = wages + interest + rents + profits
(WIRP)
GDP per capita
GDP/ population
Growth rates
(difference/original x 100)
(final - intial)/initial x 100
Unemployment rate
Unemployed/labor force X 100
Labor force participation rate
Labor force/ adult working age population X 100
or
unemployed + employed / adult working age population X 100
adult working age population refers to people who are adults and includes ppl who are no longer searching for jobs, retired, or institutionalized
Natural unemployment rate
Frictional (temporary) + structural (workers don’t have the skills)
Total unemployment rate
Natural + cyclical
or
frictional + structural + cyclical
CPI (consumer price index)
market basket in a given year/market basket in base year x 100
mb = price (current year) * quantity (base year)
CPI measures changes in prices over time
Inflation rate
% change in CPI = (CPI (current) - CPI (base))/CPI (base) x 100
Triangle cheat code nominal, deflator, and real
Nominal on top over deflator and real
Nominal
Deflator X real / 100
GDP Deflator
Nominal/real X 100
Real
Nominal/ deflator X 100
Real %
Nominal % — inflation
Inflation rate
% change in GDP deflator
[GDP(final)-GDP(initial) / GDP(initial)] x 100
Market basket calculations
P (current) x Q (base)
Real GDP calculation
P (base year) x Q (current year)