formulas unit 2 Flashcards
GDP expenditure approach
C+I+G+Xn
GDP income approach
W+I+R+P
GDP deflator
(nominal GDP/real GDP) x 100
real GDP
(nominal GDP/GDP deflator) x 100
nominal GDP
(deflator x real GDP)/100
GDP growth rate
(current year GDP - Last year GDP/Last year GDP) x 100
CPI
(price of market basket/price of market basket in base year) x 100
real interest rate
nominal interest rate - inflation rate
unemployment rate
(number of unemployed/number in labor force) x 100
labor force participation rate
(labor force/population) x 100
contractionary fiscal policy
- for inflation
- govt. spending decreases, taxes increases
expansionary fiscal policy
- for recession
- govt. spending increases, taxes decreases
self correction for inflation
In the long run, wages and input prices are flexible and increase, which raises production costs, effectively shifting SRAS to the left.
self correction for recession
In the long run, wages and input prices are flexible and decreases, which lowers production costs, effectively shifting SRAS to the right.
nominal GDP is…
not adjusted for inflation
