Economics Midterm Exam Formula Sheet

Comprehensive vocabulary and formula flashcards covering macroeconomic indicators, market equilibrium, labor market statistics, and monetary theory for midterm exam preparation.

Opportunity cost per unit

$$\frac{\text{Potential Loss (= total value of output given up after specialization)}}{\text{Potential gain (=total value of output produced after specializaion)}}$$

Equilibrium Price and Quantity ($P^*$ and $Q^*$)

Found algebraically by setting $Q_d$ equal to $Q_s$, solving for $P$, and substituting its value back into either the $Q_d$ or $Q_s$ formula.

Surplus

$$Q_s - Q_d$$

Shortage

$$Q_d - Q_s$$

GDP: Expenditure Approach

$$\text{Consumption} + \text{Investment} + \text{Government Purchases} + \text{Net Exports}$$

GDP: Income Approach (Factor Payments Approach)

$$\text{Wages} + \text{Rent} + \text{Profit} + \text{Interest Payments}$$

GDP: Value Added Approach

$$\text{Firm's revenue} - \text{The cost of intermediate inputs}$$

Nominal GDP

$$\text{output} \times \text{current prices}$$

Real GDP

$\text{output} \times \text{constant price}$, or calculated as $\frac{\text{Nominal GDP}}{\text{GDP deflator (or implicit price deflator)}} \times 100$

Nominal GDP per capita

$$\frac{\text{Nominal GDP}}{\text{Population}} \times 100$$

Real GDP per capita

$$\frac{\text{Real GDP}}{\text{Population}} \times 100$$

Real Wages

$$\frac{\text{Nominal Wages}}{\text{CPI}} \times 100$$

Consumer Price Index (CPI)

$$\frac{\text{Cost of a basket of goods and services (in current prices)}}{\text{Cost of basket of goods and services (in base year)}} \times 100$$

GDP deflator (or implicit price deflator)

$$\frac{\text{Nominal GDP}}{\text{Real GDP}} \times 100$$

Inflation rate

The percentage change in the price level (CPI or GDP deflator), calculated as $\frac{\text{CPI}_t - \text{CPI}_{t-1}}{\text{CPI}_{t-1}} \times 100$ or $\frac{\text{GDP Deflator}_t - \text{GDP Deflator}_{t-1}}{\text{GDP Deflator}_{t-1}} \times 100$

Equation of exchange

$$M \times V = \text{Price Level} \times \text{Real GDP}$$

Quantity Theory of Money

$M \times V = \text{Price Level} \times \text{Real GDP}$ (where $V$ and real GDP are assumed to be constant)

Quantity Theory of Money (growth rate form)

$$\%\Delta M + \%\Delta V = \%\Delta\text{Price Level} + \%\Delta\text{Real GDP}$$

Labor force

$$\text{employed} + \text{unemployed workers}$$

Unemployed workers

Those who do not have a job and are actively looking for one. Unemployed workers not looking for a job are excluded from the labor force.

Unemployment rate

$$\frac{\text{unemployed workers}}{\text{employed} + \text{unemployed workers}} \times 100$$

Labor-force participation rate

$$\frac{\text{Labor Force}}{\text{Civilian non-institutionalized population}} \times 100$$

Working-age population ratio

$$\frac{\text{employed workers}}{\text{Civilian non-institutionalized population}} \times 100$$

Money multiplier ($mm$)

$$\frac{1}{\text{required reserve ratio}} \times 100$$

Change in the money supply

$$mm \times \text{the reserve injection}$$

Interest rate

$$\frac{\text{Face Value} - \text{Price of Bond}}{\text{Price of Bond}} \times 100 = \frac{\text{Interest Payment}}{\text{Price of Bond}} \times 100$$

Real interest rate

$$\text{nominal interest rate} - \text{inflation rate}$$