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45 Cards in this Set
 Front
 Back
CPI
(given year) 
(costmarket basket in given yr)
 (costmarket basket in base yr) X 100 

Inflation

Cpi New yr
 Cpi base yr 

Aggregate demand

Y=c+I+G+(EIM)


GDP

Y=c+I+G+(EIM)
Or NI= National Income 

Real Salery

Nominal/CPI x 100


Consumption Function

C=a+b(DI)


MPC

Change in consumption
/ Change in Disposable income 

DI

GDPtaxes + transfer payments


Nominal rate of interest

Real interest + Expected Inflation


Real GDP

Nominal GDP / GDP deflater
x 100 

growth rate of Potential GDP

Growth rate of labor force
+ Growth rate of labor productivity 

Multiplier
(Fixed Taxes) 
1 / (1mpc)


total profit

total revenue  total cost


productivity

output / hours worked


interest rate

change in Price
 price 

money supply

M = c+d


RESERVE RATIO

RESERVES
 DEPOSITS 

Multiplier
(variable Taxes) 
Change in GDP
 change in expenditure 

Tax Rate

Change in taxes
 change in GDP 

Contractionary fiscal tools
(3 main things) 
Cutting government spending
raising taxes reduces inflation 

Expansionary fiscal policy
(4 main things) 
 increase government spending
 decrease taxes  Increase transfer payments  reduces unemployment 

Required reserves

(Loan) x (required reserve rate)


Change in money supply

(1/reserve ratio) x (change in reserves)


reserve ratio

reserves
 deposits 

Velocity

Y x p
 m 

Value of transfers (p)

m x v
 y 

Gdp ( in relation to Money supply)

m x v
 p 

Money supply ( M1 type)

y x p
 v 

Changing Velocity formula
(bonus #1 exam 2) 
(%change in v) x (% change in m)
= (%change in p) x (% change in y) 

What happens to unemployment when GDP goes down?

unemployment goes up


Unemployment rate

unemployment
 Labor Force 

total out put (employment)

employment x labor productivity


real salery

nominal salary
 cpi x 100 

GDP growth rate

Growth of population
 Growth of Labor production 

Economic growth

GDP(1+growth rate)^yrs


GDP / capita

GDP
 population 

Growth rate of potential GDP

Growth rate of labor input
+ Growth rate of productivity 

Real GDP

Nominal GDP
 GDP Deflater x 100 

Real spending

nominal spending
 price index x 100 

Income Expenditure Graph
(2 key points) 
Expenditure increases because wealth increases
Expenditure decreases because wealth decreases 

what happens to wealth when prices goes up

wealth goes down


Savings

(y  t)  c
or (DI)  c 

tax multiplier

b
 1b(1t) 

Recessionary gap
(3 key points) 
producers push wages down
excess supply of workers  AS shifts outword 

Inflationary gap
(2 key points) 
 workers push wages up
 AS shifts inward (As= aggregate supply) 