Transcript Formulas for Macro AP

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Formulas for Macro AP
GDP = C + I + G + X – M
MPC = 1 – MPS
Spending multiplier = 1/MPS or 1/(1-MPC)
Real GDP = nominal GDP/price index
Monetary multiplier = 1/RRR
Total addition to banking system = 1st loan x
money multiplier + initial deposit IF IT’S NEW $
• Amt. of $ a bank can loan = excess reserves =
total reserves – (RRR x checkable deposits)
• Real interest rate = nominal interest rate –
expected inflation rate
• Balanced budget multiplier is when change in G
= change in taxes; change in GDP = 1 x change
in G or change in T
• Comparative advantage: output (OOO); input
(IOU)
• Unemployment rate = # of unemployed/total
labor force
• Price index = P market basket in yr. 2/ P market
basket in yr. 1
• Okun’s law: GDP gap (difference between
actual and potential GDP) = 2 times the
difference between unem. Rate and NRU