22 Macroeconomics formulas you need to know for the Exam
Updated 3/20/2017 Jacob Reed
Below you will find all the formulas you need to know for Macro Economics. Unfortunately for some, the Macro exam is a little more math heavy than the Micro exam. But fear not, the list below is all you need.
For a quick reference you can take with you, get the PDF Microeconomics and Macroeconomics Review Formulas Cheat Sheet.
Output Expenditure Model
GDP=C+Ig+G+(X-M)= Consumption + Gross Investment + Government Spending+ (Exports – Imports)
GDP = Compensation of Employees + Rents + Interest + Proprietors Income + Corporate Profits + Taxes on Imports + Statistical Discrepancy – Consumption of Fixed Capital
GDP Multiplier Formulas
MPC = 1- MPS
MPC = Change in Consumption / Change in Income
MPS = 1-MPC
MPS = Change in Savings / Change in Income
Spending Multiplier = Government Spending Multiplier = Investment Multiplier = 1 / (1-MPC) = 1 / MPS
Tax Multiplier = MPC / (1-MPC) = MPC / MPS (also 1 less than the spending multiplier)
Balanced Budget Multiplier = 1
Inflation = Nominal % change – Real % change
Real % Change = Nominal % change – Inflation
CPI = New Market Basket Value/Base Market Basket Value x 100
Deflator = Nominal Value/Real Value x 100
Inflation rate = (New Index – Old Index) / Old Index x 100
Real value = Nominal Value/Index x 100
Time Value of Money
Future Value = Present Value + (Present Value x Interest Rate)
Present Value ≈ Future Value – (Future Value x Interest Rate)
Comparative Advantage Formulas
Absolute Advantage: The entity that can produce more units with the same amount of inputs or produce the same amount with fewer inputs has an absolute advantage.
Comparative advantage: The entity that can produce a good or service at a lower opportunity cost.