Equations Cheat Sheet

Expenditures Approach: GDP = Consumption (C) + Gross Private Domestic

Investment (Ig) + Government Purchases (G) + Net Exports (Xn)
Income Approach: GDP = National Income - Net Foreign Factor Income +
Statistical Discrepancy + Consumption of Fixed Capital (Depreciation)
National Income (NI) = Wages + Rents + Interest + Proprietors Income +
Corporate Profits + Taxes on Production and Imports.
National Income (NI) = NDP - Statistical Discrepancy + Net Foreign Factor
Income.
NDP = GDP - Depreciation
Personal Income (PI) = NI - Taxes on Production and Imports - Social Security
Contributions - Corporate Income Taxes - Undistributed Corporate Profits + Transfer
Payments
Disposable Income (DI) = PI - Personal Taxes
Price Index in Year Y =

price of market basket in year Y

100
price of same market basket in base year

nominal GDP in year Y

real GDP in year Y

Real GDP =

nominal GDP
price index (in hundredths)

Rule of 70: Approx. # of Years to Double =

Unemployment Rate =

70
annual percentage rate of growth

unemployed
100
labor force

GDP Gap = actual GDP - potential GDP

Consumer Price Index (CPI) =

price of the most recent market basket in a particular year

100
price estimate of the same market basket in 1982-1984

Real Income =

nominal income
price index (in hundredths)

% Change in Real Income % Change in Nominal Income - % Change in Price

Level
Nominal Interest Rate = Real Interest Rate + Inflation Premium (Expected
Inflation)
Saving (S) = Disposable Income (DI) - Consumption (C)
Average Propensity to Consume (APC) =

Consumption (C )
Disposable Income (DI)

Saving (S)
Disposable Income (DI)

Average Propensity to Save (APS) =

APC + APS = 1

Marginal Propensity to Consume (MPC) =

Marginal Propensity to Save (MPS) =

Change in Consumption
Change in Income

Change in Saving
Change in Income

MPC + MPS = 1
Multiplier =

Change in real GDP

Initial Change in Spending

1
MPS

1
1MPC

Equilibrium GDP (Private Closed Economy) = Consumption (C) + Gross Private

Domestic Investment (Ig)
Equilibrium GDP (Private Open Economy) = C + Ig + Net Exports (Xn)
Equilibrium GDP (Public Open Economy) = C + Ig + Xn + Government
Purchases (G)
Per-Unit Production Cost =

Productivity =

total output
total input

total input cost

units of output