Macro Formulas and NIA Practice

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Macro Formulas and NIA Practice
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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
17th Edition
NIA Practice Personal taxes
400 -Undistributed corp. profits 46
Imports 360 -Social Security contrib.
169 Transfer payments
283 Personal consumption 2,400
-Corporate Income Taxes 88 Gross private
domes invest. 550 -Taxes on prod.
imports 231 Government purchases
600 Exports 460 Depreciation Capital
consumption 300 Statistical Discrepancy
10 N.F.F.I.E. in the U.S. -12

C
Ig
G
Xn Gross
Domestic Product (GDP) -Consumption of
fixed capital Net Domestic Product (NDP)
Net For. Factor Inc. Earn. U.S.
-Statistical Discrepancy National Income
(NI) -Undistributed Corporate Profits
-Corporate income taxes
-Social Security
Contributions
-Taxes on prod. imports Transfer payments
Personal Income (PI)
-Personal Taxes Disposable Income
(DI)
Im going through an academic recession.
2,400
______ ______ ______ ______ ______ ______ ______
_ ______ ______ ______ ______ ______ ______ _____
__ _______ _______ ________ _______
550
English C Accounting
C American History D Economics
F
600
100
ROW 100
3,650
-300
3,350
-12
-10
112
3,328
-46
-88
-534
-169
NFFI -12
-231
283
3,077
-400
2,677
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Review For NIA, Economic Growth, Unemployment,
Recessions, Inflation, Business Cycles

• 1. If Apple produces an iPod video 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 110 bil., In was
• 35 bil., then in that year the
• countrys capital stock national
• factory (increased/decreased)
• by (35/75) billion.

Depreciation 700
-200 In
Ig 500 bil.
In 35 bil.
Ig 110
Depreciation 75 billion
5

• 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 NFFI Statistical discrepancy
• PI NI U (-Undis. Corp profits),Can
  (-Corp. inc. taxes,
• See (-Soc. Secur.), Those (-Taxes
  on production and
• imports) 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.

6

• 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
7

• 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