Useful Equations
1. Nominal GDP = GDP = P1 X Q1 + P2 X Q2 + … Pn X Qn = ∑ (Pi X Qi)
2. GDP = C + I + G + NX = C + I + G + (X-M)
3. National Income = Compensation of Employees + Proprietor’s Income + Corporate Profits + Rental Income of Persons + Net Interest
4. GDP = National income - Income earned from the rest of the world + Income earned by the rest of the world + Indirect business taxes (excise, sales, property tax) + Capital consumption allowance + Statistical discrepancy
5. Net domestic product (NDP) = GDP – Capital consumption allowance
6. Personal income = National income– Undistributed corporate profits– Social insurance taxes – Corporate profits taxes + Transfer payments
7. Disposable income = Personal income – Personal taxes = Personal Income – [(tax rate) x Personal Income]
8. Percentage change in real GDP = (Real GDP later year – Real GDP earlier year/ Real GDP earlier year) x 100
Total dollar expenditure on market basket in current year
9. CPI = ------------------------------------------------------------------------------------- X 100
Total dollar expenditure on market basket in base year
10. Percentage Change in Prices or Inflation Rate =
(Percentage change in prices later year - Percentage change in prices earlier year/ Percentage change in price earlier year) X 100
11. Nominal Income
Real Income = -------------------------------------------- X 100
CPI
12. Salary in current dollars = Salary earlier year x (CPI current year/CPI earlier year)
13. Number of unemployed persons
Unemployment Rate = ---------------------------------------------------- X 100
Civilian labor force
Number of employed persons
14. Employment Rate = ---------------------------------------------------- X 100
Civilian non-institutional population
15. Civilian labor force
Labor Force Participation Rate = --------------------------------------------- x 100
Civilian non-institutional population
16. Real Wage = (Nominal Wage/ Price Level )* 100
17. UC = U- UN
Part II: Equations
18. Government Expenditure = Government Revenue
19. Government Expenditure/Spending = Government Purchases + Transfer Payments
20. Government Purchases = Purchases of goods and services of government at all levels
21. Transfer Payments = Payments to persons that are made not in return of goods and services, currently supplied, such as social security payments
22. Average tax rates = [taxes paid/taxable income] X 100
23. M1 = Currency held outside banks + Checkable deposits + Traveler’s checks
24. M2 = M1 +Savings deposits (including money market accounts) + Small denomination time deposits + Money market mutual funds (retail)
25. M x V ≡ P x Q
26. MV = TE = C + I + G + NX
27. Maximum change in checkable deposits = (1/r) x ΔR
28. Nominal interest rate = Real interest rate + Expected inflation rate.
29. Bond pays earlier year x 100/interest rate later year = Bond Price later year
30. %ΔM + %ΔV = %ΔP + %ΔQ
31. %ΔM = %ΔQ – %ΔV
32. Federal funds rate target = Inflation + Equilibrium real federal funds rate + 1⁄2 (Inflation gap) + 1⁄2 (Output gap)
33. CPI later – CPI earlier/CPI earlier x 100 = inflation rate