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Final

# MGEA06H3 Study Guide - Final Guide: Producer Price Index, Autarky, Net Present Value

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. University of Toronto Winter 2016
at Scarborough
Introduction to Macroeconomics: A mathematical Approach
(Formulas Sheet)!
Important Formulas:
1. GDP = C + I + G + NX (E - IM)
2. GNP = GDP + Income earned by Canadian outside of Canada - Income earned by foreigners in Canada
3. GNP = GDP + Net Factor Income Earned Abroad
4. Real GDP = fixed price in a base year x current year quantity
(* when we are trying to have an accurate measure of economic growth, we look Real GDP )
5. Nominal GDP = current year price x current year quantity
6. Real GDP per capital = Real GDP / Population
A) Two formulas to evaluate price index:
1. GDP Deflator = Nominal GDP / Real GDP × 100
(* fix quantity and change the price to evaluate price index)
2. CPI = (base year quantity × current year price) / (base year quantity × base year price) × 100
B) Other way to evaluate price index:
3. IPPI (Industrial Producer Price Index) = (base year quantity × current year price) / (base year quantity × base year price) × 100
=> it measures the wholesale cost of fixed basket of good, which includes raw materials, etc.
=> which was purchased by producers.
=> IPPI often responds more quickly to inflationary or deflationary, b/c producers are sensitive to the changes in
overall demand for their goods.
7. Employment (E) = age 15 years old who gets a full time / part time job
8. Unemployment (U) = age 15 years old who doesn’t currently have a paid job but is available for work and
actively find job within 4 weeks
9. Labour Force (LF) = U + E (people who are working and people who are actively finding a job)
10. Not in the Labour Force (NILF) = don’t have a job and are not looking for a job
(for example: full/part time students, housewife, retiredness)
11. Adult Population (Population 15) = U + E + NILF - Population under 15 = LF + NILF - Population under 15
12. Labour Force Partition Rate = (Labour Force / Adult Population) × 100%
13. Unemployment Rate = (# of people unemployed / Labour Force) × 100%
14. Employment Rate = (# of people employed / Adult Population) × 100%
15. Inflation Rate = [(year 2 price level - year 1 price level) / year 1 price level] × 100%
16. Real Interest Rate = Nominal Interest Rate - Inflation Rate
(* Nominal Interest Rate is what you can see in bank)
17. Expected Real Interest = Nominal Interest Rate - Expected Inflation Rate
18. Actual/Realized Real Interest = Nominal Interest Rate - Actual Inflation Rate
Remark: If Expected Real Interest > Actual/Realized Real Interest => borrowers WIN
If Expected Real Interest < Actual/Realized Real Interest => lenders WIN
19. Unexpected Inflation = Actual Inflation - Expected Inflation
20. # of years for a variable to double = 70 / Annual growth rate of variable
21. APL (Average Product of Labour) = real GDP / # of workers
22. Investment = Savings
23. GDP (for a closed economy) = Y (total income) = C + I + G
24. SNational = Y - C - G = SPrivate + SPublic
25. SPrivate = Y - T + TR - C
26. SPublic = T - TR - G = GBB (Government Budget Balance)