Macro Essentials

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10 Terms

1
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CPI

CPI=Cost of Basket in Base PeriodCost of Basket in Current Period​×100

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GDP Deflator

GDP Deflator=Real GDP/Nominal GDP​×100

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Real GDP

Real GDP=GDP Deflator/ Nominal GDP​

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nominal GDP

Nominal GDP=Price×Quantity

5
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Unemployment

Unemployment Rate=Labor Force/Number of Unemployed Individuals​×100%

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Spending multiplier

Spending Multiplier=1−MPC1​

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MPC

  • stands for the marginal propensity to consume, which is the proportion of additional income that households choose to spend rather than save. It represents how much each additional dollar of income is spent.

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money multiplier

Money Multiplier=1/Required Reserve Ratio1

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Required Reserve Ratio

proportion of deposits that banks are required to hold in reserve by regulatory authorities, such as central banks. It represents the fraction of deposits that cannot be lent out and must be kept in reserve.

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real interest rate

Real Interest Rate=Nominal Interest Rate−Inflation Rate