AP Econ

Per unit opportunity cost

opportunity cost/units gained

GDP Expenditure Approach

C + I + G + XN (E-I)

GDP Income Approach

W + I + R + P (wages + interest payments + rent + profits)

GDP value added approach

Add up spending on everything subtract what doesn't count

Nominal GDP

P X Q

Real GDP

P base year x Q current year

GDP Deflator

(Nominal GDP/Real GDP) x 100

Real GDP (With Deflator)

(Nominal GDP/GDP Deflator) x 100

GDP as Growth Rate

(GDP year 2 - GDP year 1 / GDP year 1) x 100

Real GDP Growth rate

Real GDP Growth rate = Nominal GDP Growth rate - Inflation Rate

CPI

(P market basket/ P market basket base year) x 100

Inflation Rate

(CPI year 2 - CPI year 1/ CPI year 1) x 100

Labor Force Participation Rate

(Employed + Unemployed/ Working age population) x 100

Unemployment Rate

(Number of unemployed/ Labor force) x 100

MPC (marginal propensity to consume)

change in consumption/change in disposable income

MPS (marginal propensity to save)

change in savings/change in disposable income

Spending Multiplier

1/ MPS

Tax Multiplier

-MPC/MPS

Calculate Change in GDP, Income, AD (Use Smult)

Change in Spending x Smult = Change in GDP, Income, AD

Calculate Change in GDP, Income, AD (Use Tmult)

Change in texas x Tmult = Change in GDP, Income, AD

Fisher Equation

Nominal interest rate - Inflation Rate = Real interest Rate

Money Mult

1/ Reserve Requirement

Change in money supply (Use money mult)

Change in Excess Reserves x Mmult = Change in Money Supply

Equation of Exchange

M x V = P x Y; the money supply x velocity of money = the price level x Real GDP

Expected Interest Rate

Expected Interest Rate= Nominal Interest - Expected Inflation

Actual Inflation Rate

Actual Inflation Rate= Nominal Interest Rate- Actual real interest