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Final

# Equations that can be used on the exam.

Department
Economics for Management Studies
Course Code
MGEA06H3
Professor
Iris Au
Study Guide
Final

This preview shows half of the first page. to view the full 2 pages of the document. SOME IMPORTANT EQUATIONS
x Labour force = number of employed + number of unemployed
x Unemployment rate = number of unemployed ÷ labour force × 100%
x Employment rate = number of employed ÷ adult population × 100%
x Labour-force participation rate = labour force ÷ adult population × 100%
x Using the Period-1 Bundle (hold quantity fixed to period 1) to Calculate the % Change in Price
o Cost of Period-1 Bundle in Period 1 = P1 • B1 = Price from period 1 • Quantity from period 1
o Cost of Period-1 Bundle in Period 2 = P2 • B1 = Price from period 2 • Quantity from period 1
o Prices Risen = (Period-1 Bundle in Period 2 – Period-1 Bundle in Period 1) ÷ Period-1 Bundle in Period 1 × 100%
x Using the Period-2 Bundle (hold quantity fixed to period 2) to Calculate the % Change in Price
o Cost of Period-2 Bundle in Period 1 = P1 • B2 = Price from period 1 • Quantity from period 2
o Cost of Period-2 Bundle in Period 2 = P2 • B2 = Price from period 2 • Quantity from period 2
o Prices Risen = (Period-2 Bundle in Period 2 – Period-2 Bundle in Period 1) ÷ Period-2 Bundle in Period 1 × 100%
x Using CPI to Calculate the % Change in Price
o Cost of Base-Year Bundle in Period 1 = P1 • B1 = Price from period 1 • Quantity from period 1
o Cost of Base-Year Bundle in Period 2 = P2 • B1 = Price from period 2 • Quantity from period 1
o CPI: CPI1 = (P1B1) ÷ (P1 • B1) × 100%
CPI2 = (P2 • B1) ÷ (P1 • B1) × 100%
o % Change in Prices = (CPI2 – CPI1) ÷ CPI1 × 100%
x Using GDP Deflator to Calculate the % Change in Price
o Cost of Current-Year Bundle in Period 1 = P1B2 = Price from period 1 • Quantity from period 2
o Cost of Current-Year Bundle in Period 2 = P2B2 = Price from period 2 • Quantity from period 2
o GDP Deflator: GDPD1 = (P1 • B2) ÷ (P1 • B2) × 100%
GDPD2 = (P2 • B2) ÷ (P1 • B2) × 100%
o % Change in Prices = (GDPD2GDPD1) ÷ GDPD1 × 100%
x Rule of 72: 72 / x% = number of years needed for a number to double
x GDP from the expenditure approach = C + I + G + NX
x Income = factor incomes + non-factor payments
x Value added = output of every firm in Canada intermediates purchased by firm
x Net National Product (NNP) = Gross National Product – Depreciation = GNP – CCA
x GNP = GDP + Net factor income earned abroad (NFIEA)
x Nominal GDPt = Pt • Bt
x Real GDPt = PBase-year • Bt
x Real GDP should equal Nominal GDP in the base year
x To get GDP in year B into year A prices:
x Supply = actual expenditure = actual national income = GDE = C + I + G + X – IM
x Demand (AD) = desired expenditure = AD = C + I + G + X – IM except unexpected changes in inventories
x The key is investment (I) in GDE includes unintended change in inventories while I in AD includes only intended investment.
x The underlying model is given by:
AE = AE0 + cYY
where AE = aggregate expenditure = aggregate demand
AE0 = autonomous expenditure = constant
c
Y = d AE / d Y = constant, 0 < cY < 1
Y = GDP = output = income
x A single consumption function:
C = C (DI), where DI = disposable income = Y – T + TR
C = C0 + C1DI, where C0 = autonomous consumption
C1 = marginal propensity to consumer out of DI = MPC
x A simple investment function:
I = I (r), where r = real interest rate
I = I0 dr, where I0 = autonomous investment
d = ûI / ûr = constant
x National saving (NS) = Y – CG
x Private savings (SP) = DI – C = Y – T + TR – C
x Public savings (SG) = T – TR – G
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