Macroeconomics Equations

These flashcards cover key equations and concepts in macroeconomics for better understanding and memorization.

Aggregate Demand (AD)

The total demand for goods and services in an economy, calculated as C + I + G + (X – M).

Nominal GDP

The total market value of all finished goods and services produced within a country's borders in a specific time period, calculated as C + I + G + (X – M).

Multiplier

A factor that quantifies the increase in economic activity resulting from a change in spending, calculated as 1 ÷ (1 – MPC).

MPC (Marginal Propensity to Consume)

The fraction of additional income that a household consumes rather than saves, calculated as Change in Consumption ÷ Change in Income.

MPW (Marginal Propensity to Withdraw)

The sum of the Marginal Propensity to Save (MPS), Marginal Tax Rate (MPT), and Marginal Propensity to Import (MPM). MPS + MPT + MPM.

Inflation (CPI)

A measure of the rate of inflation, calculated as (Index Year – Index Base Number) ÷ Index Base Number × 100.

Unemployment Rate

The percentage of the labor force that is unemployed, calculated as (Unemployed ÷ Labour Force) × 100.

Current Account Balance

The difference between a country's value of exports and value of imports.

Real GDP

The inflation-adjusted value of all goods and services produced in a country, calculated as Nominal GDP ÷ Price Index × 100.

Interest Rate Impact

A qualitative assessment that indicates an increase in interest rates leads to a decrease in Aggregate Demand (↑ Interest = ↓ AD).

Budget Deficit

The financial situation where government spending exceeds tax revenue.