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
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