Formulas and relationships

Question 1

Balance of payments divided into

Answer 1

current account balance & financial account balance

Question 2

current account balance

Answer 2

Trade Balance
*Trade in Goods: Exports – Imports. *Trade in Services: Exports – Imports

Income Balance
*Investment Income: Receipts – Payments. *Dividends: Receipts – Payments.

Transfers Balance (e.g. remittances)

Question 3

capital account balance

Answer 3

Capital Transfers Balance (ex. debt forgiveness) Financial Account Balance
*Direct Investment: e.g. acquisition of a foreign firm. *Portfolio Investment: e.g. purchase of foreign shares. *Other Investment: e.g. bank loans to foreign consumers.
*Reserve Assets (held by the Central Bank): *Gold and Foreign Exchange

Question 4

national savings = ?
(no external sector)

Answer 4

S (National Savings) = I

Question 5

Private Saving = ?
(no external sector)

Answer 5

Private Saving = I + Public Deficit

Question 6

private saving = ?
(with external sector)

Answer 6

I + Public Deficit + Current Account Balance
Private Savings = I + (G – T) + CA Balance

or

Private Saving + Financial Account Balance = I + Public Deficit

Question 7

GNP (Gross National Product)

Answer 7

Market value of the production of final goods and services carried out, in one year, by domestically owned productive factors.

Question 8

Real GNP:

Answer 8

Value of the production of final goods and services carried out in one year, by domestically owned productive factors, using the prices of a base year.

n the base year: Nominal GNP = Real GNP

Question 9

GDP

Answer 9

Market value of the production of final goods and services carried out in an economy, in one year, by the productive factors located in the country.

Question 10

GDP = GNP + ? - ?

Answer 10

+ Income of Foreign factors located in the
country
- Income of National factors located abroad.

Question 11

growth rate

Answer 11

(Yt – Yt-1) / Yt-1

Question 12

National Income (NI):

Answer 12

Gross remuneration of all the productive factors of the economy over the course of a year.

Question 13

National Income (NI) =

Answer 13

GNP - Depreciation of capital (K)
- Indirect Taxes + Subsidies

Question 14

Origin of Income:

Answer 14

◼From Labor: salary, wages, payments in kind…
◼From Capital: profits, dividends, interest…
◼From Land: rental income, capital gains…

Question 15

disposable income

Answer 15

NI - Direct Taxes + Public Sector Transfers to
Families
Yd = C + S

Question 16

GDP =

Answer 16

C + I + G + (X-M)

Question 17

GDP calculation methods

Answer 17

◼Value Added =
Value of Sales - Cost of Embedded
Intermediate Goods

Question 18

Inflation

Answer 18

The aggregate increase in the level of prices in the
economy

Question 19

CPI (Consumer Price Index)

Answer 19

Weighted average price of a list of more than three hundred goods and services.
(calculated relative to the base year)

Question 20

Calculation of inflation with CPI

Answer 20

The percent increase in CPI
((CPI t-CPI t-1)/ CPI t-1)*100

Question 21

GDP DEFALTOR

Answer 21

100 * Nominal GDP/Real GDP

Question 22

Unemployment Rate=

Answer 22

(Unemployed / Labor Force) x 100

Question 23

Labor Force Participation Rate=

Answer 23

(Labor force / Population of working age) x
100

Question 24

Labor force

Answer 24

people who by age and health can work and
are looking for a job.

Question 25

fiscal policies that affect the public budget

Answer 25

Taxes (T), Transfers (TR), Public Spending (G)

Question 26

Expansionary Fiscal Policy

Answer 26

taxes down, transfers and pub. spending up

Question 27

Contractionary Fiscal Policy

Answer 27

↑ taxes, ↓ transfers & spending

Question 28

important assumptions when talking about Keynes

Answer 28

No capital depreciation. ▪ No indirect taxes. ▪ No subsidies. ▪ No income flows between countries. Thus, GDP=GNP=NI.

Question 29

Assume Tax Revenues is a share t of aggregate income, then, Disposable Income is given by

Answer 29

𝒀𝑫 ≡ 𝒀(𝟏−𝒕)+𝑻𝑹

Question 30

Determination of Equilibrium Output Formula

Answer 30

Y=Z Z=𝑌=𝐶+𝑐(𝑌(1−𝑡 )+𝑇𝑅 )+𝐼+𝐺

Question 31

equilibrium of Production in terms of aggregate demand

Answer 31

𝑌∗=(1 /1 − 𝑐 (1 − 𝑡))A

Question 32

Autonomous spending

Answer 32

C+cTR+I+G

Question 33

Reserve Coefficient =

Answer 33

(Cash + Reserves)/ Deposits

Question 34

Fisher-equation (quality theory of money)

Answer 34

M x v = Px Y dM + dv = dP + dY M = Money Supply (M3) V = Velocity of Money P = Aggregate Price Level Y = Real GDP For price stability, M should grow at the same rate as Y. –If M grows faster than Y, P has positive growth (inflation). –If M grows more slowly than Y, P has negative growth (deflation).

Question 35

PBB=

Answer 35

Yt-G-TR

Question 36

money supply

Answer 36

currency in circulation (CC)+ Deposits (D)

Question 37

spending multiplier alpha

Answer 37

a= 1/1-(1-t)c

Question 38

Prduction IS curve formula

Answer 38

C+c((1-t)Y+TR)+I-b*I+G

Question 39

real money supply

Answer 39

M(stock of money)/P(Price level)

Question 40

Private Savings=

Answer 40

Yd – C

Question 41

Public Savings =

Answer 41

tY – G – TR

Question 42

Investment=

Answer 42

Investment=National Saving−Current Account Balance

Question 43

MONETARY Base

Answer 43

CC +R

Question 44

Money Supply (M) =

Answer 44

= Currency in Circulation (CC) + Deposits (D)