STUDY GUIDE: MACROECONOMICS ECON FORUMLA & GRAPH SHIFTS For Each Chapter Covered in ECON 2105.

STUDY GUIDE: MACROECONOMICS

ECON FORUMLA & GRAPH SHIFTS

For Each Chapter Covered

in ECON 2105

OPPORTUNITY COST – Chapter 3

Opportunity Cost Is a Ratio

O.C. cell phone = # DVD lost

# Cell phone gained

O.C. DVD = # cell phones lost

# DVDs gained

When the opportunity cost of a cell phone is x DVDs, the opportunity cost of a DVD is 1/x cell phones.

INCREASING OPPORTUNITY COSTSARE EVERYWHERE

Chapter 4: S/D of Goods and Services

Supply (Firms)price of good/service (graphed) = qty Sprice of substitute in production = Sprice of complement in production = Sresource price or other input price = SFuture Prices expected to = Snumber of sellers = Sproductivity = S

Demand (Households)price of good/service (graphed) = qty D price of substitute in consumption= D price of complement in consumption = DIncome (inferior good) = DIncome (normal good) = DFuture Prices expected to = DFuture Income expected to = Dnumber of buyers = Din preferences = D (item A) and D (item B)

D

S2P

Q

S1

D2

SP

Q

D1

FORMULAS-Chapter 21 (Chapter 5)

Expenditure Approach: GDP = C + I + G + NX

(Consumption, Investment, Government, Net Exports)

Income Approach: GDP = W + I + R + P + Indirect taxes – Subsidies + Depreciation

GDP = Net domestic product at factor cost+ Indirect taxes – Subsidies + Depreciation

Net Domestic Product at Factor Cost = Wages + Interest + Rent + Profit

Total Income: Y = C + S + NT (Consumption + Savings + Net Taxes)

Income = Expenditure

Net Exports = Exports - Imports

Savings = Y – C - NT

RGDP per Person = RGDP / Population


Unemployment rate =

Number ofpeople unemployed

x 100Labor force

Labor force participation rate = Working-age population

x 100Labor force

% Change =

Original variablex 100

difference between two variables

% Change =

original/base #x 100

Current # - original/base #


CPI in current year CPI in previous yearCPI in previous year

x 100Inflation rate =

CPI =Cost of CPI basket at current period prices

Cost of CPI basket at base period pricesx 100

GDP deflator = (Nominal GDP Real GDP) 100.

Price of stamp in 2007 dollars =Price of stamp in 1907 dollars

xCPI in 2007

CPI in 1907

Nominal wage rate in 2006

CPI in 2006x 100Real wage rate in 2006 =

Real interest rate = Nominal interest rate – Inflation rate.

FORMULAS-Chapter 24 (Chapter 8); Labor Supply/Demand

Nominal Wage RatePrice Level

RWR =

LD

LS2RWR

Labor

LS1

LD2

LSRWR

Labor

LD1

FORMULAS- Chapter 25 (Chapter 9)

Growth of real GDP =

Real GDP in current year

Real GDP in previous yearx 100

Real GDP in previous year–

Growth of real GDP = per Person

Real GDP per Person in current year


Real GDP per Person in previous year

–

Growth of real GDP per person

Growth rate of real GDP Growth rate of population– =

Growth of Population =

Population in current year


Population in previous year–

Labor Productivity = Real GDP

Aggregate hours

Years to Double = Annual % Growth Rate

70

Real GDP = quantity of labor (aggregate hours) x Labor productivity

FORMULAS-Chapter 26 (Chapter 10); Loanable Funds Market

DLFRIR = Qty DLFExp. Profit = amt. invested = DLFPopulation = DLFBus. Cycle Expansion = DLFTechnology, successful new products = DLFOptimism = Investment // Pessimism = Investment

SLFRIR = Qty LF supplied Disp. Inc. = savings = SLF Wealth = savings = SLF Exp.Fut.Inc. = savings = SLF

DLF

SLF1RIR

LF

SLF2

FORMULAS-Chapter 26 (Chapter 10); Loanable Funds Market

PDLF

LF

SLF

DLF

Govt Deficit

RIR

DLF

RIR

LF

PSLFSLF

Govt SurplusGovt surplus

ADDS to Private savings =

RIR Qty of private savings Qty of loanable funds Investment

Govt deficitADDS to Private demand for

loans =

RIR Qty of private funds supplied Qty of loanable funds Investment

NI = GI - Depreciation

Asset Price = Interest Rate SLF = PSLF + GSLF


M1 = Currency + checkable deposits + travelers checks

Not Money: $ inside banks, reg & e-checks, credit/debit cards

M2 = M1 + savings, time, & other deposits, money mktfunds

Money multiplier:[C=Currency Drain / R=Desired Reserve]

1 + CR + C

FORMULAS- Chapter 28 (Chapter 12)NIR=RIR + inflation rate

MDNIR = qty MDPL = MD RGDP = MD Financial Technology =Money Demand

ATMs = MD Credit Cards = MD

MSRRR = MS Disc rate = MS Selling Securities = MS MS = banks make smaller or less loans MS = people deposit less money V = inflation rate

Inflation Rate = $ growth + Velocity growth – RGDP growth

Velocity = (PL x RGDP) / qty of moneyPL = GDP deflator / 100

LONG RUN:Fed makes Open Mkt purchase Qty $ NIR RIR borrowing/investing (spending habits change) change in production and prices Thus, Shortrun NIR adjusts, Longrun PL adjusts

ShortrunMS = IR // Long run PL and NIR returns

MD1

MSNIR

QM

MS2


ASPL = qty S RGDP b/c of RWRPot. GDP = AS MWR = AS Money price of other resource = AS

ADPL = qty D RGDP and AD Exp. Future income, inflation, profits = AD (expectations)taxes = AD (fiscal policy)Transfer pmts/Govt. Expenditure = AD (fiscal policy)qty money = AD (monetary policy)Interest rate = AD (monetary policy)Foreign Income = AD (world economy)Global economy (expands) = AD (world economy)Exchange rate = AD (world economy)

Inflation Rate = $ growth + Velocity growth – RGDP growth

Velocity = (PL x RGDP) / qty of money

PL = GDP deflator / 100

LONG RUN:price level MD NIR RIR spending qty RGDP demanded ADprice level RWR

exchange rate (from 100yen to 125 yen for $1) = cheaper foreign goods (12,500yen goes from $125 to $100) = imports (we buy more of their goods) = AD (and less of ours)

AD

AS1PL

RGDP

AS2

DLF

RIR

LF

PSLFSLF

MC

MB

PPFGood x

Good yLS

LD

PFRGDP

RWR

Labor

MS

MD

NIR

QM

AD

PL

RGDP

AS

S

D

P

Q

LS

LD

RWR

Labor

DLF

RIR

LF

SLFSurplus Market effecting Price Floor

shortage, Market effecting Price Ceiling

Goods & Services Labor Loanable Funds

Surplus

PDLF

LF

SLF

DLF

Deficit

RIR

STUDY GUIDE: MACROECONOMICS ECON FORUMLA & GRAPH SHIFTS For Each Chapter Covered in ECON 2105.

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Transcript of STUDY GUIDE: MACROECONOMICS ECON FORUMLA & GRAPH SHIFTS For Each Chapter Covered in ECON 2105.