GDP CALCULATIONS
EXPENDITURE APPROACH
Gross Domestic Product = Consumer spending + business investment + government spending + net exports
Y= C + I + G + NX Net Exports (NX) = Exports - Imports * this number can be negative
INCOME APPROACH
GDI (Gross Domestic Income) = Wages + Interest + Rent + Profits - statistical adjustments
= compensation to employees + gross operating surplus + gross mixed income + taxes - subsidies
= wages + depreciation + rent + indirect taxes - discrepancies
Interest component = amount paid - received
Indirect taxes are those paid on the sale of a product (NOT income or corp. taxes)
GDI = GDP
VALUE ADDED APPROACH = Sum of value added to all firms
GDP = Revenue - cost of intermediate goods and services
Standard of Living: GDP/Population
INFLATION and CPI
NOMINAL to REAL CALCULATIONS = nominal number/index X 100
INDEX = Value of measure in current period/Value of measure in base period X 100
Why is it always 100? Base year/base year X 100 = 100
CPI = Consumer Price Index
Cost of basket of goods today/cost of goods in base year X 100
Inflation= Current CPI - Base CPI/Base CPI X 100
Wage Rate = Real wage for current year - real base wage/real base wage X 100
tells us how much the wage has changed between years (compare to inflation)
Interest Rates: The real rate is (approximately) the nominal rate less the rate of inflation
The lender looks at a target, future rate of return to determine what to charge today considering the expected rate of inflation
UNEMPLOYMENT
Work Force: all people who are 16 yrs or older, not in the military, not institutionalized and not in prison
Employed: per the BLS report
Work force: W/total population
Labor force participation: L/W
Labor force = E + U
Unemployment rate: U/L
GROWTH
Multipliers: Government spending: 1/1-MPC X change in G
Government tax cuts/raises: MPC/1-MPC X change in T
Marginal Propensity to consume: change in consumption/change in income
Marginal Propensity to save: change in savings/change in income
Average Propensity to consume: consumption/income
Average Propensity to save: saving/income
EXPENDITURE APPROACH
Gross Domestic Product = Consumer spending + business investment + government spending + net exports
Y= C + I + G + NX Net Exports (NX) = Exports - Imports * this number can be negative
INCOME APPROACH
GDI (Gross Domestic Income) = Wages + Interest + Rent + Profits - statistical adjustments
= compensation to employees + gross operating surplus + gross mixed income + taxes - subsidies
= wages + depreciation + rent + indirect taxes - discrepancies
Interest component = amount paid - received
Indirect taxes are those paid on the sale of a product (NOT income or corp. taxes)
GDI = GDP
VALUE ADDED APPROACH = Sum of value added to all firms
GDP = Revenue - cost of intermediate goods and services
Standard of Living: GDP/Population
INFLATION and CPI
NOMINAL to REAL CALCULATIONS = nominal number/index X 100
INDEX = Value of measure in current period/Value of measure in base period X 100
Why is it always 100? Base year/base year X 100 = 100
CPI = Consumer Price Index
Cost of basket of goods today/cost of goods in base year X 100
Inflation= Current CPI - Base CPI/Base CPI X 100
Wage Rate = Real wage for current year - real base wage/real base wage X 100
tells us how much the wage has changed between years (compare to inflation)
Interest Rates: The real rate is (approximately) the nominal rate less the rate of inflation
The lender looks at a target, future rate of return to determine what to charge today considering the expected rate of inflation
UNEMPLOYMENT
Work Force: all people who are 16 yrs or older, not in the military, not institutionalized and not in prison
Employed: per the BLS report
Work force: W/total population
Labor force participation: L/W
Labor force = E + U
Unemployment rate: U/L
GROWTH
Multipliers: Government spending: 1/1-MPC X change in G
Government tax cuts/raises: MPC/1-MPC X change in T
Marginal Propensity to consume: change in consumption/change in income
Marginal Propensity to save: change in savings/change in income
Average Propensity to consume: consumption/income
Average Propensity to save: saving/income