Formulas

Question 1

Is curve

Answer 1

Y = C(Y - T) + I(r) + G + NX > y=a-br

Question 2

Multiplier denominator

Answer 2

D = 1 - c(1-T) + m

Question 3

Components of AD

Answer 3

C = cbar + c(1-T)Y
I = Ibar - ¥(r + fbar)
X = xbar - yr
M = mY
G = G

Question 4

Taylor Rule formula

Answer 4

i_t = r* + phi_pi * pi_t + phi_x * x_t

i_t = interest rate set by central bank
• r* = neutral real interest rate (e.g. 2)
• pi_t = inflation rate
• x_t = output gap (% difference from full employment)
• phi_pi = how strongly the bank reacts to inflation (e.g. 1.5)
• phi_x = how strongly the bank reacts to output gap (e.g. 0.5)

Question 5

Government spending
Balanced budget
Condition

Autonomous investment

Answer 5

G = TY

Using formula for AD actually calculate C then I then X use G from bbcondition then solve for Ibar you know what Y is

Question 6

Gordon formula

Answer 6

D1/ke-g

D1 = D0(1+ g)

Question 7

Post/pre crisis
Solving for A B C D

Answer 7

Y= A - Brnew - C post
A - Y/ B pre
A = cbar + ibar + g + xbar/ D
B = feta + y/ D
C = feta/ D
D = 1-c(1-t) + m
Pre crisis includes no C

Question 8

Sacrifice ratio

Answer 8

Change in Y/ Change in inflation

Question 9

Perpeuity/consol
Current yield

Answer 9

P = C/i
CY = C/P

Question 10

The AD formula

Answer 10

Y = 1/D x ( cbar+ibar-fetafbar-(feta+y)r+g+xbar)