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Macroeconomic Formulas
GDP deflator: P=^ GDP valued at current prices GDP valued at base year prices
× 100 =
Nominal GDP Real GDP Nominal GDP = P × Real GDP Real GDP (or converting Nominal GDP to Real GDP) = Nominal GDP P
× 100
Consumer Price Index (CPI) = Current cost of typical bundle Base− year cost of typicalbundle
× 100
Inflation = Percentage change in CPI = % CPI % CPI = CPI current−CPI base CPI base GDP = C+ I +G+ X −M =C +T + S I + G=T + S + M−X C = Consumer Spending (private household final consumption expenditure) I = Investments made by industry (in new productive facilities) E = Exports M = Imports G = Government Spending on final goods & services T = Taxes S = Savings Unemployment rate = Unemployed Labour force Participation rate = Labour Force Population aged 16 +¿ ¿ Multiplier =
∆ GDP
∆G
Private Investment = National saving + Foreign financing National saving = Private saving – Govt deficit
National Saving Taxes Private Saving Foreign financing Government Spending Investment Spending Money Multiplier = ∆ Money Supply ∆ Money base Money supply = Money multiplier X Money base Quantity theory of money: Mv = PQ M = (1/v)PQ V = PQ/M P = overall price level Q = physical quantity of output produced M = money supply V = velocity of money Long-run rate of price inflation = Rate of growth of the money supply – Rate of real income growth + Velocity growth rate Velocity =
PQ
M
Nominal GDP Money Supply Income multiplier with respect to the money supply =
∆ GDP
∆ M
For one year to maturity i= Coupon+Capital gain Current Price
Coupon+(Face Value−Current Price) Current Price Annualized i of discount bond Faceb value−Current price Current Price
×
N
Capital gain Current Price
×
N
Nominal interest rate = Real interest rate + Expected inflation rate
