Principles of Macroeconomics #1 FORMULAS

Just the formulas

GDP

Y=C+I+G+NX

Y=GDP

C=consumpion

I=investment

G=government purchases

NX= net exports (NX=exports-imports)

Nominal GDP (when not given C, I, G, and NX)

P_current X Q_current (if multiple, add them together)

Real GDP

P_{base year} X Q_current (add them all up)

GDP Deflator

Inflation rate (GDP)

result must be a percentage

Real GDP Growth rate

outcome should be a percentage

Real GDP Per Person/Capita

Main indicator of the average person’s standard of living/economic well-being

Cost of Basket (CPI)

Multiply the quantity of each item by it’s current price and then add all the totals together

Item Cost= Quantity X Price

Total (Basket) Cost= (Q₁ X P₁) + (Q₂ X P₂) + (Q₃ + P₃)…

Consumer Price Index (CPI)

Measure of the overall cost of goods and services bought by a typical consumer, and overall level of prices in the economy.

CPI inflation rate

result must be a percentage

Converting dollars between years

old $= New CPI/old CPI

Fishers Equation (real interest rate)

Real interest rate= nominal interest rate - inflation

Real interest rate > Nominal interest rate → deflation, purchasing power increases

Nominal interest rate > Real Interest rate → inflation, purchasing power decreases

IMPORTANT: Negative inflation means subtracting a negative number, which becomes addition.

Productivity

Productivity=Y/L

Y=total output

L=total input (# of workers/hours worked)

Key determinants of productivity

• Physical Capital (K)

• Human Capital (H)

• Natural Resources (N)

• Techonological Knowledge (A)

Production Function

Y=A x F (L, K, H, N)

Constant return to scale

Changing all inputs by the same percentage causes output to change by that percentage

• Doubling all inputs (multiplying each by 2) causes output to double

  • 2Y= A x F (2L, 2K, 2H, 2N)

Nominal GDP Q2 2026

$32.6 Trillion

Real GDP (base year 2017) Q2 2026

$24.4 Trillion

Current CPI (August 2026)

334.1

Inflation (Aug 2026)

3.4%