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Macro Midterm Review

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?.

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Macro Midterm Review

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  1. Macro Midterm Review

  2. What are the formulas for the spending multiplier • 1/MPS • 1/1-MPC

  3. What is the equation for MPC • MPC = Change in consumption/change in income

  4. What is the formula for MPS • MPS = Change in savings/change in income

  5. 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

  6. What are the formulas for Nominal and Real GDP? • Nominal = quantity of goods/services x price • Real = Nominal GDP/ Price index

  7. What is the formula for the tax multiplier? • Tax Multiplier = -MPC/MPS

  8. What is the formula for the money multiplier? • MM = 1/reserve ratio

  9. 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

  10. What is the formula for the unemployment rate? • Unemployment rate = # unemployed/ Labor Force

  11. What is the formula for the CPI? • CPI = Base year quantities x current year prices/ base year quantities x base year prices

  12. What are the determinants of GDP? • C + I + G + Xn

  13. What is the formula for the equation of exchange? • MV = PQ

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