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Econ 103 equations
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Gravity
econ 103 equations chapters 1-11
Terms in this set (54)
Compute Nominal GDP
GDP=(Price of good 1 x quantity of good 1) + (price of good 2 + quantity of good 2)
Value Added
value added= firms output-value of intermediate goods
Compute Real GDP (for other years using base year)
Real GDP= (year 1 price of good 1 x year 2 price of good 1) + (year 1 price of good 2 x year 2 price of good 2)
GDP Deflator
GDP deflator = Nominal GDP/ Real GDP
National Income
Y=C+I+G+NX
Consumer Price Index (CPI)
CPI= (quantity of good 1x current price of good 1) + (quantity of good 2 x current price of good 2) / (quantity of good 1 x base year price of good 1) + (quantity of good 2 x base year price of good 2)
Labor Force
Labor force (L)= # employed (E) + # unemployed (U)
Unemployment
(# unemployed (U) / labor force)(L) x 100
labor force participation rate
abor force participation rate= (Labor force / adult population) x100
production function
Y= F(K,L)
Profit
Profit= Revenue-Labor Costs- Capital Costs
Quantity equation
Money x Velocity = price x transactions
Total dollars exchanged per year
PT= price of good x amount of good per year
Velocity of money
V= PT (amount of money per year)/ M (quantity of money in the economy)
Money Demand function
M/P (real money balances) ^d= k(constant amt of how much $ people want to hold) Y (output)
Real interest rate
r (real ir) = i (nominal ir) - pi (rate of inflation)
Fisher equation
i=r+pi
National Saving (s)
S= Y-C-G
Private Saving
Y-T-C
Public Saving
T-G
General Saving
S=I+NX
Net Exports
NX=S-I
Real Exchange Rate
Real Exchange Rate = (#foreign dollars exchange x price of domestic product)/ price of foreign product
Real
Unemployment rate
U/L = S (job separation)/ S + F (job finding)
Marginal Product of Capital (MPK)
f(k+1)-f(k)
Output per worker (Solow Model)
y=Y/L
Capital per worker (Solow Model)
k=K/L
Investment per worker (Solow Model)
i=sf(k)
Change in Capital Stock
Δk=sf(k)-δk
Steady State production function
y=√k
Golden Rule Steady State
MPK=1/2√k
Change in Capital Stock per worker
Δk= i-(δ+n)k = sf(k)-(δ+n)k
Golden Rule level of capital (K*gold) with technological progress
MPK-δ=n+g (where n population growth rate and g is tech progress) or w/o population/tech c
=f(k
*)-δk*
Efficiency of labor (E)
Y=F(K,L x E)
Quantity Theory
MV=PY
Planned expenditure
E=C(Y-T)+I+G
Consumption Function
C=C(Y-T)
Government Purchases Multiplier
ΔY=[1/1-MPC]ΔG
Tax Multiplier
ΔY=[-MPC/1-MPC]ΔT
Planned investment
I=I(r)
Demand for real money balances
(M/P)^d=L(r)
IS Model
Y=C(Y-T)+I(r)+G
LM Model
M/P=L(r,Y)
Consumption function per worker (Solow Model)
c=(1-s)y= (1-s)f(k) (use* for steady state)
Saving per worker (Solow Model)
s=sy
Change in Capital Stock
Δk=sf(k)-δk (investment-depreciation)
Population growth (rate n which is exogenous)
ΔL/L=n
Break even investment
(δ+n)k (δk replace capital as it wears out, nk equips new workers with capital)
Equation of motion for k
Δk=sf(k)-(δ+n)k
(actual i)-(b/e i)
Depreciation function
(δ+n)k
investment function
sf(k)
Golden rule with population growht
MPK-δ=n
technological progress in solow model
g=ΔE/E (rate of increased efficiency=Δlabor efficiency/labor efficiency)
production function with tech progress
Y=F(K,LxE) (where LxE is #of effective workers)
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