Macro Formulas/calculations

Labor participation rate

(# of ppl in labor force) / (working age population) x 100

Unemployment rate

(# of ppl unemployed) / (# of people in the work force) x 100

% change in GDP

( (new - old) / old ) x 100

CPI

((value of market basket) / (value in base year)) x 100

GDP Deflator

GDP (expenditure approach)

C + I + G + (X - M)

GDP (income approach)

Wages + Rent + Interest + Profit

MPS

1 - MPC

( 1 = MPC + MPS)

MPC

1 - MPS , (Change in spending / change in income)

Spending multiplier

1 / MPS

Tax multiplier

MPC / MPS

(or 1 / MPS - 1)

Money Multiplier

1 / reserve requirement

Real Interest Rate

Nominal IR - Expected Inflation

Quantity Theory of Money

MV = PY

(money supply x velocity of money) = (PL x Real GDP/output)

Inflation rate

(current CPI - previous CPI) / previous CPI

Capital/ Financial Account balance

= inflow - outflow

current account balance

= exports - imports + net income + net current transfers

Contractionary Monetary Policy

reduce money supply

increase IR

raise borrowing cost (slow econ growth)

Contractionary Fiscal Policy

Decrease AD (gov and consumer)

sell bonds

raise discount rate

raise reserve requirement

increase taxes