This page contains commonly used macroeconomics formulas. Use it as a quick reference while working through your assignments. If you have additional questions about your macroeconomics class or how to apply these formulas, join us in the Macroeconomics Office Hours session.
Aggregate Expenditure = Consumption + Investment
AE = C + I
Price = Marginal Cost, or more precisely, Marginal Social Benefit (MSB) = Marginal Social Cost (MSC)
Multiplier = 1 = 1
1 - MPC MPS
Reserve Ratio = Bank Reserves
Total Deposits
Budget Deficit = Federal Government Spending – Tax Collections (A negative deficit indicates a surplus)
CPI = Cost of Market Basket in Base Year X 100
Cost of Market Basket in Current Year
Financial Account Balance = Foreign Purchases of Home Assets – Home Purchases of Foreign Assets
GDP = C + I + G + (X – M)
GDP = NI + Depreciation + Indirect Taxes – Subsidies + Net Income of Foreigners
GDP Deflator = Current Year Quantities X Current Year Prices X 100
Current Year Quantities X Base Year Prices
GDP = Consumption + Savings Y = C + S
MPC = Change in Consumption
Change in Income
MPS = Change in Saving
Change in Income
MPC + MPS = 1
Merchandise Trade Balance = Value of Merchandise Exports – Value of Merchandise Imports
Nominal Interest Rate = Real Interest Rate + Anticipated Inflation
% increase in unemployment above natural rate × 2 = % decrease in output
Opportunity Cost = Quantity of Good Given up
Quantity of Good Made
Real GDP = Nominal GDP X 100
CPI* for the same year as the nominal figure
*CPI or GDP deflator
Real Interest Rate = Nominal Interest Rate – Anticipated Inflation
Doubling time = 70
% change per year
With 10% inflation, prices double in 70/10 = 7 years
Slope = Change in Y coordinate Slope = Δ Y / Δ X
Change in X coordinate
Simple Money (or Deposit) Multiplier = 1
Required Reserve Ratio
Unemployment Rate = Unemployed
Labor Force
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