Macro Midterm Review

What are the formulas for the spending multiplier

• 1/MPS• 1/1-MPC

What is the equation for MPC

• MPC = Change in consumption/change in income

What is the formula for MPS

• MPS = Change in savings/change in income

What is the formula for the GDP Deflator?

• GDP Deflator = current year prices x quantity of current year basket/base year prices x quantity of current year basket

What are the formulas for Nominal and Real GDP?

• Nominal = quantity of goods/services x price• Real = Nominal GDP/ Price index

What is the formula for the tax multiplier?

• Tax Multiplier = -MPC/MPS

What is the formula for the money multiplier?

• MM = 1/reserve ratio

What is the formula to compute the maximum money a bank can loan out and the entire

banking system?• Individual Bank = ER• Banking system = ER x money multiplier

What is the formula for the unemployment rate?

• Unemployment rate = # unemployed/ Labor Force

What is the formula for the CPI?

• CPI = Base year quantities x current year prices/ base year quantities x base year prices

What are the determinants of GDP?

• C + I + G + Xn

What is the formula for the equation of exchange?

• MV = PQ