macro midterm review. what are the formulas for the spending multiplier 1/mps 1/1-mpc
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Macro Midterm Review
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What are the formulas for the spending multiplier
• 1/MPS• 1/1-MPC
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What is the equation for MPC
• MPC = Change in consumption/change in income
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What is the formula for MPS
• MPS = Change in savings/change in income
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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
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What are the formulas for Nominal and Real GDP?
• Nominal = quantity of goods/services x price• Real = Nominal GDP/ Price index
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What is the formula for the tax multiplier?
• Tax Multiplier = -MPC/MPS
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What is the formula for the money multiplier?
• MM = 1/reserve ratio
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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
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What is the formula for the unemployment rate?
• Unemployment rate = # unemployed/ Labor Force
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What is the formula for the CPI?
• CPI = Base year quantities x current year prices/ base year quantities x base year prices
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What are the determinants of GDP?
• C + I + G + Xn
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What is the formula for the equation of exchange?
• MV = PQ