Equations Flashcards by Felix Ly

Q

MPC

A

MPC = (Change in consumption on domestic output)/(change in income)

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Q

MPW

A

Change in total withdraws / Change in Income

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Q

MPW and MPC Relationship

A

1 = MPC + MPW

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Q

Aggregate Demand

A

AD = C + I + G + Xn

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Q

Spending Multiplier

A

Spending Multiplier = 1/1-MPC = 1/MPW

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Q

Changes in Equilibrium GDP (Shift in AD curve)

A

spending multiplier * initial change in spending

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Q

GDP Deflator

A

Nominal GDP/Real GDP

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Q

Interest rate of Bond

A

Interest payment / price of bond

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Q

Reserve ratio

A

desired reserves/ deposits

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Q

Excess reserve

A

cash reserves - desired reserves

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Q

Money multiplier

A

1/reserve ratio

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Q

change in money supply

A

change in excess reserve * money multiplier

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Q

GDP expenditure equation

A

C + I + G + Xn(X-M)

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Q

Per Capita GDP

A

GDP/Population

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Q

Real Income

A

=Nominal Income/CPI (in hundredths)

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Q

Real GDP

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A

= Nominal GDP/GDP Deflator (In hundredths)

Q

Real Interest Rate

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A

= Nominal Interest rate - rate of inflation

Q

Nominal interest rate

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A

= Desired real interest rate + inflation premium

Q

Participation rate (%)

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A

Labour force/Labour force population x 100%

Q

Unemployment rate (%)

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A

Unemployment in labour force/Labour force x 100%

Q

Real expenditure

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A

nominal expenditure/GDP Deflator

Q

Real value of financial assets

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A

Nominal value of asset/Price level(GDP Deflator)

Q

Rule of 72: Number of Years =

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A

72/annual percentage growth rate

Q

Labour productivity

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A

real output/total hours worked

Budget Surplus/ Budget Deficit

government revenue > or < government expenditure

Cyclical Unemployment

Unemployment - Natural Unemployment

Real GDP Growth

Nominal GDP Growth - Inflation

Desired Reserves

Total Deposits x desired reserve ratio

Maximum Credit Creation

Excess reserves x money multiplier

Cyclically Adjusted Budget Balance

The government Balance at full employment