❮ 227
Chapter 5
- Optimal decision making: MB = MC
- Opportunity cost from a production possibility
curve or frontier (PPC or PPF):
Good X: The slope of the PPC
Good Y: The inverse of the slope of the PPC
Chapter 6
- Market equilibrium:
Qd = Qs - Shortage:
Qd – Qs - Surplus:
Qs – Qd - Total welfare:
= Consumer surplus + Producer surplus
Chapter 7
- Nominal GDP:
= Current year production × Current year prices - Real GDP:
(^) = 100 × (Nominal GDP)
(GDP deflator)
- Aggregate spending (GDP):
= C + I + G + (X - M) - Disposable income (DI):
= Gross income - Net taxes - Net taxes:
= Taxes paid - Transfers received
6. %D real GDP:
= %D nominal GDP – %D price index
7. Price index current year:
= 100 × (Spending current year)/(Spending
base year)
8. Consumer inflation rate:
= 100 × (CPINew – CPIOld)/CPIOld
9. Real Income:
= (Nominal income)/CPI (in hundredths)
10. Nominal interest rate:
= Real interest rate + Expected inflation
11. Labor force:
= Employed + Unemployed
12. Unemployment rate:
= 100 × (Unemployed/Labor force)
Chapter 8
- Consumption function:
C = Autonomous consumption + MPC(DI) - Saving function:
S = Autonomous savings + MPS(DI) - Marginal propensity to consume (MPC):
= DC/DDI = Slope of consumption function - Marginal propensity to save (MPS):
= DS/DDI = Slope of saving function - MPC + MPS = 1
- Net exports (X - M ):
= Exports – Imports
Important Formulas and Conditions
15_AP Macroeconomics_2018_APPx_p215-238.indd 227 30/04/18 4:30 PM