University:
Minnesota State University Moorhead
Course:
ECON-304 | Intermediate Macroeconomic Theory
Academic year:

2022
Views:

377

Pages:

3
Author:

Camilla House

Macro Formula sheet GDP  GDP = total value of all final goods and services produced by an economy in a given year  GDP = C + I + G + (X-M) or C + I + G + Xn  Not counted in GDP are illegal activities, government transfer payments (social security, welfare, veterans benefits, etc.) sale of used goods, financial payments (bonds, stocks)  GDP is also refereed to as Output, or Y  GDP per Capita = GDP/population  Real GDP (adjusted for inflation)  Nominal GDP = current dollars  Nominal – Inflation = Real  GDP Price index (deflator) = nominal GDP x 100 Real GDP  Real GDP = ________nominal __________ price index (deflator) in hundredths  Price index = market basket in a specific year x 100 Market basket in a base year Consumer Price Index   CPI = Recent market basket in a specific year Market basket in a base year Rate of Inflation = Current CPI – Previous CPI Previous CPI Marginal Propensity to Consume and Save  MPC = ∆C/∆DI  MPC + MPS = 1 MPS = ∆S/∆DI or 1-mpc  APC = C/DI APS = S/DI Simple spending multiplier  1/1-mpc or 1/mps  Government multiplier 1/1-mpc or 1/mps x 100 x 100  Tax multiplier = -MPC/MPS or make it 1 less than the multiplier and negative  SPENDING MULTIPLIER MPC .5 .6 .75 .8 .9 MULTIPLIER = 2X = 2.5 X = 4X = 5X = 10X  ∆GDP = change in spending (C, I, or G) x the Multiplier  ∆GDP = change in taxes (C, I, or G) x the Tax Multiplier (always negative)  An increase in taxes change is a positive number x negative multipiier = decrease in GDP Shift in AE will be down.    A decrease in taxes = change is a negative number x negative multiplier = increase in GDP Shift in AE will be up. ***Spending from a tax break is less then spending because we spend less of our tax break. Unemployment Rate  Civilian Labor Force = Unemployed + Employed  UR = number of unemployed x 100 Labor Force  LFPR = Civilian labor force Civilian (non- institutionalized ) Adult population  ER =  U and E have different denominators and cannot be added together with the expectation of getting 100 percent.  The Civilian Non-Institutionalized Population is everyone over the age of 16, not in the military or other institution (such as a mental hospital or prison)  To be considered unemployed a person must be actively looking for work in the past 4 weeks.  Natural Unemployment Rate –varies over time and is the amount of unemployment due to structural and frictional unemployment x 100 Employed Civilian Non – institutionalized Population x 100  Full Employment is w hen the economy is operating at its natural rate of unemployment, but never 100 percent. Types of Unemployment Cyclical – due to a recession, downturn in the economy Structural – skills of worker does not match needs of the economy Frictional – voluntary between jobs, looking for first job Seasonal – seasonal employment Money Multiplier  1/rr x ∆Fresh deposits of money = ∆Money supply     10% 5% 20% 15% rr rr rr rr = 10x = 20x = 5x = 6.67 x What is money    M1 = currency, checkable deposits, travelers checks M2 = all of M1 and CDs lower than 100,000 M3 = all of M2 and CDs above 100,000 Velocity of Money  Velocity is number of times money is used in the economy MV = P * Q M = money supply V = velocity of money P = Overall price level Q = Quantity or Real GDP PL * Real GDP = Nominal GDP

Macroeconomics Formula Sheet

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