Chapter 19 across first then (B) add down the 2009 Yearly total YE columns o Current GDP = o On a table

le where o Weight = $ value of $13,312.2b Y=AE itemsB/Total $ o Real GDP = A+I o Algebra YE = ValueB $12,990.3b 1- B Expenditure approach to 2009 Fourth Quarter Y=AE finding GDP o Current GDP= Y=C+I(500+.85y) o Current GDP = Y-.85y=500 $14,463b C+I+G+(X-M) Y(1-.85)=500 o Real GDP = I=Gross Y=500/(1-.85) 13155.0b Private and Y=500/.15 o Change from 08 domestic Y= 3,333.33 CGDP=%6.2 investment, Leakages and injections RGDP=%5.6 Substructures M+S+TAX=I+G+X % GDP = (GDP- GDPT, equipment, Chapter 22 1/GDPT-1) X 100 inventory Tax = T+tY Where o Quarterly X4 changes T=lump sum and Implicit GDP Deflator G=spending t=taxrate on income changes 0 < t <1 for defense o GDP Deflator = Adding Taxes to C and nonCurrent GDP/Real o Take his model and defense, GDP find if Y=0 Then state local o CPI = (Cost of change government BundleYear T/Cost of Consumption spending. Bundle1982-84) X 100 function to what (x-M)-X=Sold Calculations of Inflation you found. goods/service Rates Ex. Given: s M= Bought o Inflation Rate = C= 525 + .85Yd Goods/servic (IndexT IndexTT=500 es 1/IndexT-1)x100 Yd=Y-T Chapter 21 Let C=100+.85y By Month X12 Find Consumption if Y=0 Let I = 400 Find Nominal and real C= 525 + .85(0 Consumption function income 500) C=A+By o Real Income = C= 525 + .85(-500) o A=autonomous Nominal Income / consumption and is price index in C= 525 + -425 given. B=Marginal decimal form C= 100 Propensity to o Nominal Income = Use this total as your new consume, the slope consumption function. real income x price and is given, C=100 + .85Y index Y=disposable Aggregate expenditures Unemployment Rate = income after taxes. o AE = A + Zy (Unemployed x Labor Savings function force) X 100 o Investments must o Current 9.9% up A = C + G + I + (X - M) = savings DAE from 9.7% o Savings (s) = Y-C o Z= or MPC-m Labor Force = employed DY S = Y (100+.85) o z=marginal + unemployed S = y-100 -.85y Chapter 20 propensity to spend - 100 .15y n S= + Multipliers .15 .15 Current GDP= (Pit Qit) o Change in y/change Graphing consumption i=1 in X=1/1-z. where C o PriceXQuantity o C+income x or z=marginal o Do multiplication Dy propensity to

consume Chapter 23 Aggregate Demand

I G X m A MPC MPm T t AE I G X m A MPC MPm T t Shift in AE Increase Decrease Increase Decrease Increase Decrease Decrease Increase Increase Decrease Increase Decrease Decrease Increase Decrease Increase Decrease Increase

Price increases and decreases. Unit Labor Cost = Total Labor Cost/Total Output Price (ULC) X (1+ Given Markup) Total Labor Cost = Labor X Wage Productivity = Output/Labor Fiscal policies Expansionary fiscal policy o Government spending will increase as investment decreases. The government spends money on infrastructures, schools, hospitals and military. If the increase in government spending makes AE shift to the right and we get back to full employment the government is in a deficit. (G = +200) AE3= 4,000+.6y Ye= 10,000 Tax= 2000G3=2,200 The government has a $200 deficit Voluntary fiscal policy o This policy does not

use government spending but instead issues tax cuts to increase spending. Unfortunately this takes an even bigger dip into the deficit. G = +200 1.B =-.9 Y/T= -B/(1-z)=-.9/ (1-.6)=2.25 T= 500/2.25 =-222.2 Tax=22.2+.18(10, 000)= 1,777.8 G= 2,000.0 -222.2 Chapter 24 Rule of 72 = 72/growth rate Growth of GDP = p + l + (p l ) p = output l = labor Chapter 25 and 26 Growth p + l = (p l ) o l = labor p = output o US Growth rate is 3% Chinese growth o 9% o 2036 if stay at same growth rate Chapter 27 Money o M1 currency being spent o M2 transactions and store of value (savings, COD, money market) Bank balance sheets o Assets = liabilities Assets Liabilities Vault cash Personal check Dep @ Fed Res Personal

Reserves Securities Loans Interbank Catch alls

saving Borrowed $ Other liabilities SUB TOTAL THESE Left over is Net worth o Income statements Interest & fees o Expenses Paid interest Other opps o Return of equity = (interest paid/networth) X 100 Federal reserve system o 12 regional banks (1913) o Board of governors 7 governors o Chair of board o Open market 7 governors 5 presidents 0<Required reserves<1 o Can only lend excess reserves (actual reservesrequired reserves) o Demand Deposits= 1 Re serves (given) RR o To get 1 inDD = Dreserves RR US RR 7.9% Interest rates = Price of money. If interest rates are high demand is low, people are investing. If they are low people demand is high, as you do not make money on it you do not invest. Liquidity preference =demand of money Interest rate calculations

$ int rest Terms) 100 $borrowed