Chapters 19-22 Formulas

GDP, GDP Price Index, Real GDP, GDP at End Date, Rule of 70, Labor force participation rate, unemployment rate, GDP gap, Consumer Price Index, Inflation, Percentage change in real income, and Real Interest Rate

How to find GDP

GDP = Consumption + Investment + Government spending + (exports-imports)

GDP Price Index

GDP Price Index = Price of market basket in specific year/price of market basket in base year \* 100

Real GDP

Real GDP = Nominal GDP/GDP Price Index *100 or Units of output* base year’s price

GDP at end date

GDP at end date = GDP at starting date \* (1+ GDP growth rate)^year

Rule of 70

Years required to double GDP = 70/annual percentage of growth

Labor force participation rate

Labor force participation rate = labor force/total adult population \* 100

Unemployment rate

Unemployment/labor force \* 100

GDP gap

GDP gap = Real GDP - Potential GDP

Consumer price index

Consumer price index = Price of market basket in specific year/price of market basket in base year \* 100

Inflation

Inflation = cost in new year - cost in previous year / cost in previous year \* 100

Percentage change in real income

Percentage change in real income = percentage change in nominal income - inflation rate

Real interest rate

Real interest rate = nominal interest rate - inflation rate