AP Macroeconomics Formulas

Output Expenditure Model (GDP)

• GDP = C + I + G + (X - M)

• GDP = Consumer Spending + Investment + Government Spending + (Exports - Imports)

Income Approach

• GDP = W + I + R + P

• GDP = Wages + Interest + Rent + Profit

Marginal Propensity to Consume (MPC)

• 1 - MPS

• (Change in Consumption)/(Change in Income)

Marginal Propensity to Save (MPS)

• 1 - MPC

• (Change in Savings) / (Change in Income)

Spending Multiplier

• 1 / MPS

Tax Multiplier

• -MPC / MPS

Inflation

(Nominal % Change) - (Real % Change)

CPI

• (New Market Basket Value) / (Base Market Basket Value) * 100

Deflator

• (Nominal Value) / (Real Value) * 100

Inflation Rate

• (New Index - Old Index) / (Old Index) * 100

Real Value

• Nominal Value / Index * 100

Money Multiplier

• 1 / Reserve Requirement

Quantity of Money Theory

• Nominal GDP = M x V = P x Y