Microeconomics and Macroeconomics Formulas

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Questions and Answers

What formula represents the Average Total Cost (ATC)?

  • ATC = TVC + TFC
  • ATC = AFC + AVP
  • ATC = MC + AFC
  • ATC = TC/Q (correct)

Economic Profit is calculated as Total Revenue minus Total Explicit Cost only.

False (B)

What is the formula for the Unemployment Rate?

Unemployment Rate = [# of Unemployed/LF] × 100

The formula for Marginal Cost (MC) is __.

<p>MC = ΔTVC/ΔQ = ΔTC/ΔQ</p> Signup and view all the answers

Match the following economic terms with their definitions:

<p>Gross Income = Total income from rents, wages, interests, and profits Economic Profit = Total Revenue minus Total Costs (explicit and implicit) GDP Gap = Difference between potential and actual GDP Unemployment Rate = Percentage of the labor force that is unemployed</p> Signup and view all the answers

What does the formula ϵP = %ΔQd / %ΔP represent?

<p>Price elasticities of demand (B)</p> Signup and view all the answers

The Average Variable Cost (AVC) is calculated as Total Variable Cost divided by output quantity (Q).

<p>True (A)</p> Signup and view all the answers

At equilibrium, Aggregate Expenditure (AE) equals __.

<p>GDP</p> Signup and view all the answers

What is the formula for calculating Labour Productivity?

<p>Q/L (D)</p> Signup and view all the answers

The Participation Rate is calculated by dividing the Labor Force by the Working Age Population.

<p>True (A)</p> Signup and view all the answers

What does the Money Multiplier represent?

<p>It represents the maximum amount of money that a bank can create with each dollar of reserves.</p> Signup and view all the answers

The formula for Excess Reserves is: Actual Reserves - ______

<p>Target Reserves</p> Signup and view all the answers

What is the equation for Aggregate Demand (AD)?

<p>AD = C + Ig + G + XN (C)</p> Signup and view all the answers

The formula for the Money Multiplier is given as Δ Deposits / Δ Reserves.

<p>True (A)</p> Signup and view all the answers

Calculate the Real Interest Rate if the Nominal Interest Rate is 5% and the Inflation Rate is 2%.

<p>3%</p> Signup and view all the answers

What components are included in the GDP formula GDP = C + Ig + G + XN?

<p>Consumption, Investment, Government spending, Net Exports (A)</p> Signup and view all the answers

The CPI formula is used to calculate the overall price level in the economy.

<p>True (A)</p> Signup and view all the answers

What is the formula to calculate the Inflation Rate?

<p>CPIYr2 − CPIYr1 / CPIYr1 × 100</p> Signup and view all the answers

The GDP Deflator is calculated by dividing __________ by Real GDP.

<p>Nominal GDP</p> Signup and view all the answers

Match the following economic concepts with their definitions:

<p>GDP Growth = Percentage increase in GDP over time Nominal Income = Income measured at current prices Real Income = Income adjusted for inflation Natural Rate of Unemployment = Long-term average unemployment rate in an economy</p> Signup and view all the answers

Which of the following correctly describes how to calculate Real GDP Per Capita?

<p>Real GDP divided by total population (C)</p> Signup and view all the answers

The formula for calculating the __________ uses the change in nominal income and the inflation rate.

<p>Percentage change in Real Income</p> Signup and view all the answers

What does the term 'RGDPPC' stand for and represent?

<p>Real GDP per Capita; it represents the average economic output per person, adjusted for inflation.</p> Signup and view all the answers

Flashcards

What is Gross Domestic Product (GDP)?

The total value of all final goods and services produced within a country's borders in a given period.

What is the expenditure approach to calculating GDP?

The expenditure approach to calculating GDP adds up spending on all final goods and services. It includes consumption (C), investment (Ig), government spending (G), and net exports (XN).

What is the income approach to calculating GDP?

The income approach to calculating GDP adds up all the income earned by factors of production. It includes compensation of employees, gross operating surplus, gross mixed income, taxes (net of subsidies) on production, and indirect taxes (net of subsidies).

What is Net Exports (XN)?

The difference between exports (X) and imports (IM). A positive net export value indicates a trade surplus, while a negative value indicates a trade deficit.

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Price Elasticity of Demand (ϵP)

The change in quantity demanded (Qd) divided by the change in price (P), all divided by the average of the initial and final prices.

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What is Real GDP measured in?

The total value of goods and services produced within a country's borders in current prices, also known as nominal GDP.

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What is GDP growth?

The percentage change in real GDP from one period to another. It measures the rate of economic growth.

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Price Elasticity of Supply (ϵS)

The change in quantity supplied (Qs) divided by the change in price (P), all divided by the average of the initial and final prices.

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What is Real GDP per capita?

A measure of how much output is produced per person in an economy. It reflects the standard of living.

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Income Elasticity of Demand (ϵY)

The change in quantity demanded (Qd) divided by the change in income (Y), all divided by the average of the initial and final incomes.

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Cross-Price Elasticity of Demand (ϵAB)

The change in quantity demanded of good A (QdA) divided by the change in price of good B (PB), all divided by the average of the initial and final prices of good B.

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What is the inflation rate?

The percentage change in the price level of an economy from one period to another. It reflects the rate of inflation.

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Total Cost (TC)

The total cost (TC) of production is the sum of all explicit costs (out-of-pocket expenses) and implicit costs (opportunity costs).

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Accounting Profit

Accounting profit is the difference between total revenue (TR) and total explicit costs.

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Economic Profit

Economic profit is the difference between total revenue (TR) and total cost (TC), including both explicit and implicit costs.

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Unemployment Rate

The unemployment rate is the percentage of the labor force that is unemployed but actively looking for work.

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Real Interest Rate

The difference between the nominal interest rate and the inflation rate. It reflects the real cost of borrowing and the real return on lending.

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Labor Productivity

Measures the output produced per unit of labor. It is calculated by dividing total output (Q) by the total units of labor (L) used.

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Participation Rate

The percentage of the working-age population that is either employed or actively seeking employment. It is calculated by dividing the labor force (LF) by the working-age population and multiplying by 100.

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Real Wages

The real value of wages, adjusted for inflation. It is calculated by dividing nominal wages by the price level (PL) and multiplying by 100.

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Aggregate Demand (AD)

The total spending in the economy, including consumption (C), investment (Ig), government spending (G), and net exports (XN). It represents the aggregate demand for goods and services.

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Marginal Propensity to Consume (MPC)

The change in consumption (ΔC) divided by the change in disposable income (ΔY). It represents the proportion of additional income that is spent on consumption.

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Marginal Propensity to Save (MPS)

The change in savings (ΔS) divided by the change in disposable income (ΔY). It represents the proportion of additional income that is saved.

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Marginal Leakage Rate (MLR)

The change in total leakages (Δ Total Leakages) divided by the change in income (ΔY). Represents the proportion of each extra dollar of income that leaks out of the circular flow of income.

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Study Notes

Microeconomics Formulas

  • Per unit opportunity cost = what you give up / what you get
  • Per unit opportunity cost = Cost / Gain
  • €Ρ = %∆Qd / %ΔΡ [(Q2-Q1)/((Q2+Q1)/2)] [(P2-P1)/((P2+P1)/2)]
  • Απ = Τπ/Q
  • €S = %∆Qs/%ΔΡ [(Q2-Q1)/((Q2+Q1)/2)] [(P2-P1)/((P2+P1)/2)]
  • Slope = ARise / ΔRun = AQ
  • €Y = %∆Qd / %ΔΥ [(Q2-Q1)/((Q2+Q1)/2)] [(Y2-Y1)/((Y2+Y1)/2)]
  • AP₁ = TP/L= Q/L
  • €ΑΒ = %∆Q&A / % ΔΡΒ [(QA2-QA1)/((QA2+QA1)/2)] [(Рв2-PB1)/((PB2+PB1)/2)]
  • TC= Explicit cost + Implicit Cost
  • Accounting π = TR – Total Explicit Cost
  • Economic Profit = TR-[Explicit Cost + Implicit Cost]
  • TP = Q
  • MP₁ = ΔΤΡ/AL= ∆Q/AL
  • TC = TFC + TVC
  • AVC= TVC/Q
  • AFC =TFC/Q
  • ATC = AC =TC/Q
  • ATC =AFC+AVC
  • MC = ΔTVC/ΔQ= ΔTC/ΔQ
  • MC = ATVC/AQ= ATC/AQ
  • ΣΜC = TVC
  • TR = P x Q
  • AR =TR/Q
  • MR =ΔTR/ΔQ
  • Απ = AR-ATC =Τπ/Q
  • Μπ =ΔΤπ/ΔΟ

Macroeconomics Formulas

  • Gross Income = Y=Yp = Rent + Wages + Interest + Profit
  • YƉ=Y-T + Tr
  • YD=C+S
  • At Equilibrium: S + T-Tr +IM = Ig+X+G
  • At Equilibrium: AE = GDP =Y
  • GDP = C+I+G+XN
  • XN=X-IM
  • Unemployment Rate = [# of Unemployed/LF] × 100
  • GDP Gap = Potential GDP (YFE) - Actual GDP (Real or Nominal)
  • GDP GAP = 2.5 × Cyclical Unemployment Rate × Actual GDP (Real or Nominal)
  • Cyclical Unemployment Rate = Actual Unemployment Rate -Natural Rate of Unemployment
  • CPI = (Cost of basket in a given Year / Cost of basket in base Year) ×100
  • Inflation Rate = (CPIYr2 - CPIYr1 / CPIYr1) ×100
  • GDP Deflator = (Nominal GDP / Real GDP) x 100
  • Real Value = (Nominal Value in Year A / Price Index in Year A) × Price Index in Year B
  • GDP Growth = (GDPYr2 - GDPYr1 / GDPYr1) ×100
  • RGDP Per Capita = Real GDP/Population
  • (Economic) Growth Rate = (RGDPPCYr2 - RGDPPCYr1 / RGDPPCYr1) × 100
  • Labour Productivity = Output per period / Units of Labour
  • Participation Rate = [LF/Working Age Population] × 100

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