AP Macro Economics: GDP, Unemployment, and Inflation Formulas

GDP (Expenditures Approach)

Y=C+I+G+ (X − M)

Y

GDP

C

Consumption

I

Gross Investment

G

Government Spending

X-M

Net Exports (Exports - Imports)

GDP (Income Approach)

Y= W+I+R+P

W

Wages

I (Income Approach)

Interest

R

Rent

P

Profits

Unemployment Rate

(Unemployed / Labor Force) × 100

Labor Force

Includes employed and unemployed individuals actively seeking work

Labor Force Participation Rate

(Labor Force / Working Age Population) × 100

Natural Rate of Unemployment

Frictional Unemployment + Structural Unemployment

Consumer Price Index (CPI)

(Value of market basket at current prices / Value of market basket at base prices) x 100

Inflation Rate

(CPI current - CPI previous) x 100

Real Interest Rate

Real Interest Rate = Nominal Interest Rate - Inflation Rate

Real Wage Rate

(Nominal Wage Rate / CPI) x 100