228 ❯ Important Formulas and Conditions- Equilibrium in the loanable funds market:
S = I - Spending multiplier:
= 1/(1 - MPC) = 1/MPS
= (D GDP)/(D spending) - Tax multiplier (Tm):
= MPC × (Spending multiplier) = MPC/MPS
= (D GDP)/(D taxes) - Balanced-budget multiplier = 1
Chapter 9
- Macroeconomic short-run equilibrium
AD = SRAS - Macroeconomic long-run equilibrium
AD = SRAS = LRAS - Recessionary gap:
= Full employment GDP – Current GDP - Inflationary gap:
= Current GDP – Full employment GDP
Chapter 10
- Budget deficit:
= Government spending – Net taxes - Budget Surplus:
= Net taxes – Government spending
Chapter 11
- M1 measure of money:
= Cash + Coins + Checking Deposits +
Traveler’s checks - M2 measure of money:
= M 1 + Savings deposits + Small (e.g., under
$100,000 CDs) time deposits + Money market
deposits + Money market mutual funds - Present value (PV) of $1 received a year from
today:
= $1/(1 + r) - Future Value (FV) of $1 invested today at
interest rate r for one year = $1 × (1 + r) - Money demand:
= Transaction demand + Asset demand - Equilibrium in the money market:
MS = MD - Reserve ratio (rr)
= Required reserves/Total deposits - Simple money multiplier:
= 1/rr
Chapter 12
- Equilibrium in the currency ($) market:
Qd for the $ = Qs of the $ - Revenue from a tariff:
= Per unit tariff × Units imported
15_AP Macroeconomics_2018_APPx_p215-238.indd 228 30/04/18 4:30 PM