ECON 101 - Formulas

  1. How do you calculate GDP?
    (Expenditure Approach)
    Y = C + I + G + NX 

    • Y=Gross Domestic Product
    • C=Consumption
    • I=Investment
    • G=Government Purchases
    • NX=Net Exports (Exports - Imports)
  2. How do you calculate the GDP deflator?
    GDP deflator = (nominal GDP / real GDP) x 100.
  3. Percentage change (increase or decrease). 

    * very important * 
    Can be used to calculate change in GDP (by measuring the change in the GDP deflator), or an annual change in the CPI to measure the inflation rate among other things.
    [(New number - Original number) / Original number] x 100

    • ex.
    • 2011 GDP deflator = 108.2
    • 2012 GDP deflator = 109.6

    [(109.6 - 108.2) / 108.2] x 100

    % change in GDP from 2011 to 2012 = 1.29%
  4. GDP per capita
    A country's GDP ÷ a country's population
  5. 1. What is the formula for calculating CPI?

    2. What is the formula for calculating the inflation rate using CPI?
    1. The CPI in any year equals (Expenditures Now ÷ Expenditures in base year) x 100

    2. Inflation rate = [(CPI this year  - CPI last year) ÷ CPI last year] x 100 %
  6. What is the formula to calculate what $20,000 in 1986 is equivalent to in terms of 2013 purchasing power?
    Value in 2013 dollars = (CPI in 2013 ÷ CPI in 1986) x Value in 1986

    • CPI 2013 = 121.9
    • CPI 1986 = 64.4

    (121.9 ÷ 64.4) x $20,000 = $37,857
  7. Real interest rate
    Real interest rate = Nominal interest rate - inflation
  8. 1. How do you calculate the unemployment rate?

    2. How do you calculate the labour force participation rate?

    3. How do you calculate the employment-participation ratio? 
    1. Unemployment rate = (number of unemployed ÷ Labour force) x 100

    2. Participation rate = (Labour force ÷ Working age population) x 100

    3. Empoloyment-participation ratio = (Number of employed ÷ Working-age population) x100
  9. 1. How do you calculate real GDP?

    2. What does real GDP permit us to do?
    1. Multiply the current year's total quantities of C + I + G + NX by base year prices. Add them up, and this will be real GDP.

    2. Real GDP permits us to compare economic growth from year to year in terms of production of goods and services.
Author
MissionMindhack
ID
345304
Card Set
ECON 101 - Formulas
Description
The key formulas needed to succeed in the course
Updated