Macro Formulas

Question 1

What is the formula for Real GDP?

Answer 1

Real GDP = (Nominal GDP × 100) / Inflation Index

This formula adjusts nominal GDP for inflation to reflect the true value of goods and services produced.

Question 2

How is GDP per capita calculated?

Answer 2

GDP per capita = Total GDP / Population

This measure divides the total economic output by the number of people, providing an average economic output per person.

Question 3

What is the formula for the unemployment rate?

Answer 3

Unemployment rate = No. of Unemployed / Labour Force Population

This ratio indicates the percentage of the labor force that is unemployed.

Question 4

What does Aggregate Demand (AD) consist of?

Answer 4

Aggregate Demand (AD) = C + I + G + (X – M)

Here, C = Consumption, I = Investment, G = Government spending, X = Exports, M = Imports.

Question 5

How is Nominal GDP calculated?

Answer 5

Nominal GDP = (Real GDP × Inflation Index) / 100

This formula converts real GDP into nominal terms by accounting for inflation.

Question 6

What is the formula for the Inflation Index?

Answer 6

Inflation Index = (Nominal GDP / Real GDP) × 100

This index measures the rate of inflation relative to GDP.

Question 7

How can Total GDP be calculated?

Answer 7

Total GDP = GDP per capita × Population

This formula provides the total economic output by multiplying the average output per person by the total population.

Question 8

What is the relationship between the number of unemployed and the unemployment rate?

Answer 8

No. of Unemployed = Unemployment Rate × Labour Force Population

This relationship helps to determine the actual number of unemployed individuals based on the unemployment rate.

Question 9

How is Labour Force Population determined?

Answer 9

Labour Force Population = No. of Unemployed / Unemployment Rate

This formula calculates the total labor force by rearranging the unemployment rate formula.

Question 10

What is the formula for the Multiplier?

Answer 10

Multiplier = 1 / MPW

MPW stands for Marginal Propensity to Withdraw, indicating the proportion of income not spent.

Question 11

What is an alternative formula for the Multiplier?

Answer 11

Multiplier (alternative) = 1 / (1 – MPC)

MPC stands for Marginal Propensity to Consume, indicating the proportion of additional income that is spent.

Question 12

What does the Change in National Income depend on?

Answer 12

Change in National Income = Multiplier × Injection

An injection refers to an increase in spending in the economy.

Question 13

How is Net Investment calculated?

Answer 13

Net Investment = Gross Investment – Depreciation

This formula accounts for the loss of value in capital goods over time.

Question 14

What does Terms of Trade (ToT) measure?

Answer 14

Terms of Trade (ToT) = (Index of X Prices / Index of M Prices) × 100

This index compares the prices of exports to the prices of imports.

Question 15

What is the formula for Relative Unit Labour Costs (RULC)?

Answer 15

Relative Unit Labour Costs (RULC) = Total Labour Costs / Total Output

This measure indicates the labor cost per unit of output.

Question 16

How is the Consumer Price Index (CPI) calculated?

Answer 16

Consumer Price Index (CPI) = (Cost of market basket in given year/cost of market basket in base year) × 100

CPI measures changes in the price level of a basket of consumer goods and services.