Econ Equations

CPI

(Cost of basket in base year / Cost of basket in current year ) ​×100

Real GDP

Base Year Price * Current Quantity

Equation for Nominal GDP

Current Price * Current Quantity

Income Approach

Formula:

GDP = W + R + I + P + T - S

Where:

• W = Wages (employee compensation)

• R = Rent (income from land/property)

• I = Interest (earned on capital)

• P = Profits (business owners’ earnings)

• T = Taxes on production and imports

• S = Subsidies (subtracted because they reduce market prices)

Expedature Approach

Formula:

GDP = C + I + G + (X - M)

Where:

• C = Consumption — spending by households (food, rent, clothing, etc.)

• I = Investment — spending by businesses on capital (factories, equipment) + changes in inventories

• G = Government spending — on goods/services (schools, roads, defense)

• X = Exports — goods sold abroad

• M = Imports — goods bought from abroad
  → (X − M) adjusts for net exports (exports minus imports)

Real Wage

Nominal Wage / CPI

Rate of Inflation

( CPI(2) - CPI(1) ) / CPI (1)

Unemployment Rate

(Number of Unemployed / Labor Force) * 100

Real GDP W/O Base Year

Nominal GDP / GDP Deflator *100

Real GDP w Base Year

Real GDP = Quantity in current year × Price in base year