Equations

Question 1

Total Product

Answer 1

output per factor X number of factors

Question 2

average product

Answer 2

TP / units of variable input

Question 3

Marginal product

Answer 3

change in TP / change of variable input

Question 4

total cost

Answer 4

TC = TFC+TVC
TC = ATC X Q

Question 5

total fixed cost

Answer 5

TFC = TC - TVC
TFC = AFC X Q

Question 6

total variable cost

Answer 6

TVC = TC - TFC
TVC = AVC X Q

Question 7

Average total cost

Answer 7

ATC = TP/Q
ATC = AFC + AFV

Question 8

Average fixed cost

Answer 8

AFC = TFC/Q
AFC = ATC - AVC

Question 9

average variable cost

Answer 9

AVC = TVC/Q
AVC = ATC - AFC

Question 10

Marginal cost

Answer 10

MC=∆TC/∆Q

Question 11

total revenue

Answer 11

TR= P X Q

Question 12

Average revenue

Answer 12

AV=TR/Q=P

Question 13

Marginal revenue

Answer 13

MR=∆TR/∆Q

Question 14

AD Equation

Answer 14

C+I+G+(X-M)

Question 15

GNI

Answer 15

GNI is the total income received by the residents of a country in a year, regardless to where the factors of production owned by the residents are located.

Question 16

GNP

Answer 16

GNP = GDP + net income from abroad (ex foreign investment from abroad)

Question 17

GDP Deflator

Answer 17

measures the level of prices of all final goods and services produced in an economy
GDP Deflator = (New price)/(Base year price) x 100

Question 18

Calculating the GDP using the GDP deflator

Answer 18

Real GDP = (Nominal GDP)/(GDP deflator) x 100

Question 19

Unemployment rate

Answer 19

Unemployment rate= (number of unemployed workers)/(labour force) x 100

Question 20

Green GDP

Answer 20

GDP - depreciating environmental capital - expenditure arising from fixed damages done to the environment

Question 21

Multiplier effect (definition)

Answer 21

how an increase in the initial price leads to a higher increase in national income (real GDP).

Question 22

Marginal propensity to consume (MPC) (definition)

Answer 22

the portion of additional income used for consumption

Question 23

Marginal propensity to save (MPS) (definition)

Answer 23

the portion of income used for savings

Question 24

Marginal propensity to tax (MPT) (definition)

Answer 24

the proportion of additional income paid as tax

Question 25

Marginal propensity to import (MPM) (definition)

Answer 25

the portion of income spent on imports

Question 26

marginal propensity equation / what they equal

Answer 26

MPC + MPS + MPT + MPM = 1

Question 27

Total income generated in a household (multiplier effect equation) / Keynesian multiplier

Answer 27

Total income generated = Initial injection X 1/(1-MPC) = 1/(MPS+MPT+MPM)

or

MPS+MPT+MP=MPC-1

Question 28

Economic growth

Answer 28

(Real GDP - Real GDP from previous period)/(Real GDP or previous period) X 100

Question 29

Inflation rate

Answer 29

(price index in year n - price index in previous year) / price index in previous year) X 100

Question 30

price index in year n

Answer 30

(value of basket in year n) / (value of basket in base year) X 100

Question 31

average tax rate

Answer 31

(tax amount) / (income amount) X 100

Question 32

Marshall-Lerner condition for the devaluation/depreciation in currency

Answer 32

PEDx + PEDm > 1 = improvement in CAD

PEDx +PEDm =1 = no change

PEDx + PEDm <1 = worsening of CAD

Question 33

Terms of trade

Answer 33

(index of export prices) / (index of import prices)

Question 34

terms of trade price index

Answer 34

(average price) / (average base year)

Question 35

balance of trade

Answer 35

the difference between a country’s total exports and total imports