Econ Formulas and NIA Practice

1
Econ Formulas and NIA Practice
2
Formulas
Base year50/501x100100
46/50x10092deflation of 8
Price of Market Basket(2001)
nominal GDP 64 GDP Price Index
Price of same Market Basket(1998)x100
Real GDP 50x100128 GDP Deflator in the
base year (1998)
64/128 x 100 50
6,7371994/126.11987(4,540)x100 5,343
803. Real GDP deflates nominal GDP to actual
valuetakes the air out of the nominal balloon
Unemployment
5,655,000 Labor Force x 100 unemployment
rate 140,863,000 x 100 4 Employed
unemployed
135,208,0005,655,000 2000
Okuns Law or GDP gap)Unemployment Rate over
6 x 2 7.5, so 1.5x2 3.
Or, 3 billion GDP Gap100 billion nominal GDP
x .03 3 billion.
(2000-later year)
(1999-earlier year) Change/original x
100 Current years index last
years index 172.2-166.6(5.6) C.P.I.
Last years index(1999-earlier year) x 100
166.6 x100 3.4

_________________________ Rule of 70
annual rate of increase (3) 23 years
70
Real Income measures the amount of
goods/services nominal income will buy. change
in real income change in nominal income -
change in PL. 5
10
5
3
NIA Practice How
To Do It Personal taxes 403 -Undistributed
corp. profits 46 Imports 362 -Social
Security contrib. 169 Transfer payments
283 Personal consumption 2,316 -Corporate
Income Taxes 88 Gross private domes invest.
503 Indirect business taxes
231 Government purchases 673
Exports 465 Depreciation Capital
consumption 307 N.F.F.I.E. in the U.S. -12
Im going through an academic recession.

C
Ig
G
Xn Gross
Domestic Product (GDP) -Consumption of
fixed capital Net Domestic Product (NDP)
Net For. Factor Inc. Earn. U.S.
-Indirect business taxes National Income
(NI) -Undistributed Corporate Profits
-Corporate income taxes
-Social Security
Contributions
Transfer payments
Personal Income (PI) -Personal
Taxes Disposable Income (DI)
2,316
______ ______ ______ ______ ______ ______ ______
_ ______ ______ ______ ______ ______ ______ _____
__ _______ ________ _______
Report Card English C Accounting
C American History D Economics
F
503
673
ROW 100
103
3,595
-307
3,288
-12
-231
112
3,045
-46
-303
-88
NFFI -12
-169
283
3,025
-403
2,622
4
NIA
1 Personal taxes 382 -Undistributed
corp. profits 65 Imports 348 -Social
Security contrib. 158 Transfer payments
330 Personal consumption 1,820 -Corporate
Income Taxes 98 Gross private domes invest.
447 Indirect business taxes
265 Government purchases 587
Exports 377 Depreciation capital
consumption 317 N.F.F.I.E. in the U.S. 10
C Ig G Xn
Gross Domestic Product (GDP)
-Consumption of fixed capital Net Domestic
Product (NDP) Net For. Factor Inc.
Earn. U.S. -Indirect business
taxes National Income (NI)
-Undistributed Corporate Profits
-Corporate income taxes
-Social Security Contributions
Transfer payments
Personal Income (PI)
-Personal Taxes Disposable Income
(DI)
1,820 447 587 29 2,883 -317 2,566 10 -265 2,3
11 -65 -98 -158 330 2,320 -382 1,938
ROW 110
100
NFFI 10
5
NIA
10 Personal taxes 58 -Undistributed corp.
profits 23 Exports 113 -Social Security
contrib. 40 Imports 89 Personal
consumption 362 Transfer payments
41 Gross private domes invest. 134 Corporate
income taxes 38 Government purchases
169 Indirect business taxes
21 Depreciation capital consumption
45 N.F.F.I.E. in the U.S. -23
C Ig G Xn
Gross Domestic Product (GDP)
-Consumption of fixed capital Net Domestic
Product (NDP) Net For. Factor Inc.
Earn. U.S. -Indirect business
taxes National Income (NI)
-Undistributed Corporate Profits
-Corporate income taxes
-Social Security Contributions
Transfer payments
Personal Income (PI)
-Personal Taxes Disposable Income
(DI)
362 134 169 24 689 -45 644 -23 -21 600 -23 -38
-40 41 540 -58 482
ROW 100
123
NFFI -23
6
Review For NIA, Economic Growth, Unemployment,
Recessions, Inflation, Business Cycles

• 1. If Maytag produces a washer and sells it, it
  counts as (Consumption/investment/disinvestment).
  If they dont sell it,
  it counts as (C/investment/disinvestment).
  If they dont sell it until the next
  year, it counts as (C/invest./disinvestment).
• 2. If depreciation exceeds
• gross investment, then
• In is (positive/negative).
• 3. If Ig were 100 bil., In was
• 40 bil., then in that year the
• countrys capital stock national
• factory (increased/decreased)
• by (40/60) billion.

Depreciation 700
-200 In
Ig 500 bil.
In 40
Ig 100
Depreciation 60
7

• Review Questions 4-8
• 4. GDP is all goods/services produced (by a
  nations citizens
• all over the world/within the U.S.).
• 5. Depreciation can be determined by
  (subtracting In from Ig/ subtract In from GDP).
• 6. National Income Accounting
• GDP CIgGX-M
• NDP GDP depreciation
• NI NDP N.F.F.I. Indirect business
  taxes
• PI NI U (-Undis. Corp profits), Can
  (-Corp. inc. taxes,
• See(-Soc. Secur.), Thunderducks
  (Transfer payments))
• DI PI individual income taxes
• 7. Nominal GDP
• Price Index x 100 Real GDP
• 8. Workers most likely to get hurt during a
  depression are
• (durable/non-durable) ones because these
  goods are postponable they have monopoly few
  sellers power.

8

• Review Questions 5-12
• 9. Inflation
• later years index(120-earlier years index(115)
  (chg.) 5
• earlier years index (115)
  (org.) 115 x100 4.3
• If CPI falls from one year to the next,
  (inflation/deflation) results.
• 110-115 _-5_
• 115 115 x 100 -4.3
• 10. In the base year, the price index is always?
  ______
• 10 trillion
• 10 trillion x100 100
• 11. Income earned by U.S. resource suppliers
  here abroad
• is (NDP/NI/PI).
• 12. Another name for FE GDP is (zero
  unemployment/potential GDP).

100
2004
9

• Review Questions 13-19
• 13. During a recession, (actual/potential) GDP
  exceeds
• (actual/potential) GDP, but the
  (actual/potential)
• unemployment rate exceeds the
  (actual/potential)
• unemployment rate.
• 14. If there are 15 million part time workers and
  4 million
• get full time jobs, the unemployment rate
• (increases/decreases/stays the same).
• 15. If there are 8 million unemployed and 4
  million get discouraged and
• quit looking, unemployment
  (increases/decreases/stays the same).
• 16. The presence of discouraged workers and
  counting part-time
• workers as fully employed
  (understates/overstates) the official rate.
• 17. If the unemployment rate is 20 nominal GDP
  is 400 billion, then cyclical (real)
  unemployment is __, the gap is ___, and
  output (GDP) being forgone is __________.
• 18. If we move from a recession to FE, we move
  from a
• (point inside the PPC to the PPC/shift the
  PPC out).
• 19. If unemployment is 14 nominal GDP is 500
  bil., then cyclical (real)
• unemployment is ___, the gap is ___, Y
  being forgone is ______.

Recession
28
14
112 billion
80 bil.
16
8