**GDP** = Gross Domestic Product

- Nominal GDP - use current year prices
- Base GDP - use base year prices

Y = C + I + G + NX

- Y = GDP
- C = Consumption
- I = Investment
- G = Government Spending
- NX = Net Exports (Exports - Imports)

**GDP Deflator** = ((nominal GDP) / (real GDP)) * 100

**Percent Change** = ((Year 2 - Year 1) / (Year 1)) * 100

**U-rate** (unemployment rate) = ((# of unemployed) / (labor force)) * 100

**Labor force participation rate **= ((labor force) / (adult population)) * 100

**CPI** (Consumer Price Index) = ((cost of basket in current year) / (cost of basket in base year)) * 100

**Inflation rate **= ((CPI this year - CPI last year) / (CPI last year)) * 100

**Amount in today's dollars **= (amount in year T dollars) * ((price level today) / (price level in year T))

**Real Wage:** (W / P) = ($15/hour) / ($5/unit of output) = 3 units output per hour

- 1 / P is the value of $1, measured in goods
- A relative price is the price of one good relative to (divided by) another

**Quantity Equation:** (M * V) = (P * Y)

- M = money supply
- V = velocity
- P = price
- Y = real GDP

**Velocity of Money:** V = (P * Y) / M

**Fisher Effect:** (nominal interest rate) = (inflation rate) + (real interest rate)

**Wealth Effect:** P rises, C falls

**Interest Rate Effect:** P rises, I falls

**Exchange Rate Effect:** P rises, NX falls

Y = Yn + a

- Y = real GDP
- Yn = Natural Rate of Output
- a = the deviation, defined as (actual price level - expected price level)
- When P deviates from the Expected Price, Y deviates from the Natural Rate of Output

**Production Function: **Y = AF(L, K, H, N)

**Private Saving: **Y - T - C

**Public Saving: **T - G

**National Saving: **(Y - T - C) + (T - G) **or **Y - C - G

**Future Value of Money: **FV = PV(1 + r)^N

- FV = Future Value
- PV = Present Value
- r = interest rate
- N = number of time periods

**Present Value of Money: **PV = FV / ((1 + r)^N)

**The Money Multiplier **=** **1 / R

- R = reserve ratio

**The Multiplier Effect: **1 / (1 - MPC)

- MPC = Marginal Propensity to Consume