Economics Formulas

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29 Terms

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Per-Unit Opportunity Cost
Opportunity Cost/ Unit Gained
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GDP (Expenditure Approach)
C + G + I + (E-I)
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GDP (Income Approach)
Wages + Rent + Interest + Profit
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GDP Growth Rate Formula
\[(Year 2 GDP - Year 1 GDP) / Year 1 GDP\] Ă— 100
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GDP Deflator
(Nominal GDP/Real GDP) x 100
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or GDP Deflator
(Price of selected goods in current year/Price of selected goods in base year) x 100
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Real GDP
(Nominal GDP/GDP Deflator) x 100
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Output Growth
\[(Year 2 GDP - Year 1 GDP) / Year 1 GDP\] Ă— 100
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CPI
(Cost of market basket/Cost of market basket in base year) x 100
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Inflation Rate (using CPI)
\[(Year 2 CPI - Year 1 CPI)/Year 1 CPI\] x 100
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Inflation Rate (using GDP Deflator)
\[(Year 2 GDP Deflator - Year 1 GDP Deflator)/Year 1 GDP Deflator\] x 100
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Labor Force
Employed + Unemployed
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Labor Force Participation Rate
(Labor Force/Working Age Pop.) x 100
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Unemployment Rate
(Num of Unemployed/Num in Labor force) x 100
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Real GDP Growth Rate (also works for interest rate and income growth rate)
Nominal GDP Growth Rate - Inflation Rate
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Nominal GDP Growth Rate (also works for interest rate and income growth rate)
Real GDP Growth Rate + Inflation Rate
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MPC
Change in spending / Change in disposable income
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MPS
Change in Saving/Change in disposable income
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MPS + MPC =
1
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Spending Multiplier
1/MPS
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Tax Multiplier
\-MPC/MPS
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Change in GDP (or AD or Income) (Spending Multiplier)
Change in Spending X Spending Multiplier
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Change in GDP (or Ad or Income) (Tax Multiplier)
Change in Taxes X Tax multiplier
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Money Multiplier
1/Reserve Requirement
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Change in the Money Supply
Change in Excess Reserves X Money Multiplier
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Real Interest Rate (Fisher Equation)
Nominal interest rate – Inflation rate
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Nominal Interest Rate (Fisher Equation)
Real interest rate + Inflation rate
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Quantity Theory of Money
MV = PY (Money Supply X Velocity of Money = Price level X Real Output)
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Another way to write Quantity Theory of Money
\
MV = Nominal GDP