AP Macroeconomics: All the Essential Equations

Calculating GDP via the Expenditure Approach

Calculating GDP via the Expenditure Approach

consumer spending (C) + investment (I) + government spending (G) + net exports (X_n, Exports - Imports)

Calculating GDP via the Income Approach

WRIP (wages, rent, interest, profit) + taxes on imports + statistical discrepancy - spending on fixed capital

Labor force

Employed + unemployed

Labor Force Participation Rate

Labor Force / Non-institutionalized civilian population

Unemployment rate

Unemployed / Labor Force

Marginal Propensity to Consume (MPC)

1 - MPS

or

Change in consumption/change in disposable income

Marginal Propensity to Save (MPS)

1 - MPC

or

Change in savings/change in disposable income

Spending multiplier

1/(1-MPC)

or

1/MPS

Tax Multiplier

MPC/(1-MPC)

or

MPC/MPS

or

Spending multiplier - 1

Inflation

Nominal % change - Real % change

CPI (Consumer Price Index)

(New “basket” value/Base “basket” value) x 100

GDP Deflator

(Nominal value/Real value) x 100

Inflation (2)

((New Index - Old Index) / Old Index) x 100

Money multiplier

1/Reserve requirement

Quantity theory of money

Money supply x Velocity = Price level x real GDP

Change in amount of loans

Change in excess reserves x money multiplier