# ECON 132 Lecture Notes - Lecture 1: Nominal Interest Rate, Rishi, Production Function

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Econ 259 1-6 Goran Skosples

Formula Sheet

1. National Income Accounting Identity

Y=C+I+G+NX

2. GDP deﬂator

GDP deﬂator = nominal GDP

real GDP

3. Implicit measure of inﬂation

Inﬂation rate 2004 =µGDP deﬂator 2004 −GDP deﬂator 2003

GDP deﬂator 2003 ¶∗100%

4. Consumer Price Index (CPI)

CPI in any month = Cost of basket in that month

Cost of the same basket in base period ∗100

5. Inﬂation rate (using CPI)

Inﬂation rate 2004 =µCP I2004 −CP I2003

CP I2003 ¶∗100%

6. Labor force

Labor force (L) = employed persons (E) + unemployed persons (U)

7. Unemployment

Unemployment rate (U/L) = # of unemployed (U)

labor force (L)∗100%

8. Labor force participation

Labor force participation rate (L/P OP ) = labor force (L)

adult population (P OP )∗100%

Econ 259 2-6 Goran Skosples

9. Steady-state labor market

s×E=f×U

where sis the rate of job separation and fis the rate of job ﬁnding.

10. Natural rate of unemployment

If you manipulate the condition for the steady-state in the labor market (9), you would

get U

L=s

s+f

11. Marginal productivity of capital and labor and real prices of capital and labor for the

Cobb-Douglas production function Y=F(K, L) = AKαL1−α:

MP K =αY

K

MP L = (1 −α)Y

L

12. Real prices of capital and labor

MP K =r

MP L =w

13. National income and total capital and total labor incomes

total capital income = r∗K=MP K ×K

total labor income = w∗L=MP L ×L

national income Y= total capital income + total labor income

Y=MP K ×K+M P L ×L

14. Consumption function

C=a+bY d

where ais the intercept, bis the marginal propensity to consume (MPC) and Ydis

disposable income (Y−T).

## Document Summary

Formula sheet: national income accounting identity, gdp de ator. Y = c + i + g + n x. Gdp de ator = nominal gdp real gdp: implicit measure of in ation. In ation rate 2004 = gdp de ator 2004 gdp de ator 2003. 100: consumer price index (cpi) Cost of the same basket in base period. In ation rate 2004 = cp i2004 cp i2003. Labor force (l) = employed persons (e) + unemployed persons (u : unemployment. # of unemployed (u ) labor force (l) Labor force participation rate (l/p op ) = labor force (l) adult population (p op ) Goran skosples: steady-state labor market s e = f u where s is the rate of job separation and f is the rate of job nding, natural rate of unemployment. If you manipulate the condition for the steady-state in the labor market (9), you would get.