Macro + micro

Monetary base

money in reserves + circulation.

Monetary supply

money in circulation and demand deposits

Marginal Revenue Product

change in revenue /change in inputs.

Monetary base

money in reserves + circulation

Monetary supply

money in circulation and checkable accounts

Labor force participation rate formula

(ppl in labor force/working age population)*100

Unemployment rate

(unemployed people/labor force)*100

% change in GDP

((new-old)/old)100

CPI

(market basket in given year/market basket in base year)*100

market basket

Price * Quantity

GDP deflator

(nominal/real)*100

Expenditure Approach

C + I + G + Xn

Income approach

Wages + rent + interest + profit

MPS

1-MPC & % change in saved/change in expendable income

MPC

1-MPS & change in consumption/change in expendable income

Spending multiplier

1/MPS

Tax multiplier

(-MPC/MPS)

Money Multiplier

(1/RR)

Real GDP

(new output)(old prices)

Nominal GDP

(current output)(current price)

Utility maximizing rule

MU/P=MU/P

Percent change

((new-old)/old)*100

Elasticity Demand/Supply

% change in Q/ % change in P

Cross Price elasticity

% change Q good 1/% change P good 2

Consumer/producer surplus

1/2bh

Marginal product

change in total product/change in inputs

Marginal cost

change in total cost/change in output

Total cost

VC + FC

ATC

TC/Q

AVC

VC/Q

AFC

FC/Q

TR

P*Q

Profit

TR-TC

Profit maximizing rule

MR = MC

Least Cost rule

MP/resource cost = MP/resource cost

Marginal Revenue Product

change in revenue/change in inputs

Marginal Factor Cost

change in TC/change in inputs

Explain why the aggregate demand curve is downwardsloping.

Higher prices cause spending to decrease. (real wealth effect, the interest rate effect, e exchange rate effect)

Explain how money serves as a medium of exchange, a store of value, and a unit of account.

Money is used to buy and sell goods and services (medium of exchange), save purchasing power for a later date(store of value), and measure the value of different goods and services (unit of account).

Why is market demand curve downward sloping?

substitution effect, income effect, and law of diminishing marginal utility

Explain why TR test can’t be used for elasticity of supply

TR will always increase bc S is upward sloping

Why does utility maximizing rule work

gives most marginal utility per dollar and ensures total utility grows at the fastest rate with the relative price

Why is the change in price after a price not equal to the amount of tax

Consumers don’t pay it all. Buyers and consumers share the burden

Who has the burden of tax?

Whoever’s curve is more inelastic

Why does Law of Diminishing marginal returns work

When there are limited fixed resources, more variable resources are less productive

Allocatively efficient

P=MC

Productively efficient

P=min ATC

Constant Cost Industry

Entry of firms doesn’t increase production costs

Natural monopoly

Economies of scale throughout effective demand and ATC is falling during socially optimal quantity

Why isn’t a monopolistically competitive firm productively efficient?

It doesn’t produce at lowest ATC. It produces less to maximize profit

Cartel vs Oligopoly

Cartel is colluding oligopoly

Relation between CFA and CA

CFA + CA=0