Macro Equations

Question 1

Aggregate Demand Equation

Answer 1

Consumption + Investment + Government Spending + Net Exports

Question 2

Nominal GDP: 3 Ways of Calculating It

Answer 2

• Calculate the value of all output
• Add up all factor incomes
• Expenditure (AD)

Question 3

Real GDP

Answer 3

(Nominal GDP / Price Index) x 100

Question 4

GDP Deflator

Answer 4

(Nominal GDP / Real GDP) x 100

Question 5

Nominal GDP Equation

Answer 5

(Real GDP x Price Index) / 100

Question 6

GNI

Answer 6

GDP + Net Factor Incomes

Question 7

Net Factor Incomes

Answer 7

Income earned by domestic FoP abroad - Income earned by foreign FoP domestically

Question 8

Green GDP

Answer 8

GDP - Environmental Costs

Question 9

Circular Flow of Income

Answer 9

Injections vs Withdrawals

Question 10

Multiplier

Answer 10

1/1-MPC
1/MPW

Question 11

MPW

Answer 11

Save,Tax,Import

Question 12

Change in National Income

Answer 12

Initial Injection x Multiplier

Question 13

Accelerator

Answer 13

Increased rate of GDP growth links to higher investment which gives higher growth of GDP

Question 14

Budget Deficit

Answer 14

Gov Spending > Tax Revenue
(In a Fiscal Year)

Question 15

Budget Surplus

Answer 15

Gov Spending < Tax Revenue
In a Fiscal Year

Question 16

Unemployment Rate

Answer 16

(Unemployed / Labour Force) x 100

Question 17

Index Numbers

Answer 17

(Raw Number / Base Year Raw Number) x 100

Question 18

Percentage Change

Answer 18

(Difference / Original) x 100

Question 19

Weighted Price Index rules

Answer 19

-Given a list of prices
-Convert prices to index
-Multiply by the weights
-Add up weighted prices
-Divide by total weights

Question 20

Real Interest Rate

Answer 20

Nominal - Inflation

Question 21

Taxable Income

Answer 21

Income - Tax Free Allowance

Question 22

Average Rate of Tax

Answer 22

(Amount of income tax paid / total income) x 100

Question 23

Marginal Rate of Tax

Answer 23

(Change in income tax paid / change in income) x 100

Question 24

Gini Coefficient

Answer 24

Area between LOPE and Lorenz Curve / Total Area underneath LOPE

Question 25

Absolute Poverty

Answer 25

<$2.15 / day

Question 26

Relative Poverty

Answer 26

<60% of median income

Question 27

Current Account Deficit

Answer 27

Financial and/or Capital account surplus

Question 28

Current Account Surplus

Answer 28

Financial and/or capital account deficit

Question 29

Marshall Leaner Condition

Answer 29

PEDm + PEDx > 1

Question 30

Terms of Trade

Answer 30

(Index Export Prices / Index Import Prices) x 100

Question 31

HDI Levels

Answer 31

0.8> Very High 0.7-0.79 High 0.55-0.69 Medium <0.55 Low

Question 32

Bond Yield

Answer 32

(Coupon / Market Price) x 100

Question 33

Money Multiplier

Answer 33

1/r (r is reserve requirement)

Question 34

Liquidy Ratio

Answer 34

(Short Run Assets in BoP Paysheet / Short Run Liabilities) x 100

Question 35

Capital Ratio

Answer 35

(Capital / Loans) x 100

Question 36

Fisher Equation

Answer 36

MV = PQ Money Supply x Velocity of Money = Price x Real GDP