Macro & ‘Global’ Calculations

GDP = C + I + G + X – M (rem $, mil. or bn. and 2 dp’s

(i.e., check out the 3rd decimal and if it is 5 or greater than 5, increase the 2nd decimal by one)
= GDP + (factor income from – factor income paid abroad)
GNI = GDP + NET factor income from abroad
(in mil. or bn. dollars; 2 dp’s)
𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛
rGDP (real GDP) = (𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑) × 100 (in $, bn. or mil; 2 dp’s) (nGDP is nominal GDP)
𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟
Per capita =𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 (in dollars; 2 dp’s)
rGDP (or per capita rGNI) Note that if real GDP is in, say, billions then multiply it by 10^9)
𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟08 −𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟07
Growth 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟07
× 100 ( % and 2 dp’s)
Rate (in say, 2008) (if the annual growth rate is negative, then the economy is in recession)
𝛥𝛥𝛥𝛥 = 𝜅𝜅𝜅𝜅𝐺𝐺,
𝑜𝑜𝑜𝑜, 𝜅𝜅𝜅𝜅𝐽𝐽 𝑤𝑤ℎ𝑒𝑒𝑒𝑒𝑒𝑒 𝐽𝐽 = (𝑋𝑋, 𝐼𝐼, 𝐺𝐺)
𝟏𝟏 1 1
Keynesian Multiplier 𝜅𝜅 = = =
(𝟏𝟏−𝑴𝑴𝑴𝑴𝑴𝑴𝒅𝒅 ) (𝑀𝑀𝑀𝑀𝑀𝑀+𝑀𝑀𝑀𝑀𝑀𝑀+𝑀𝑀𝑀𝑀𝑀𝑀) 𝑀𝑀𝑀𝑀𝑀𝑀
Note: if no government then no MRT; if closed economy, then no
MPM) (always 2 dp’s; rem multiplier is a number without any units)
1
m = 𝑟𝑟𝑟𝑟𝑟𝑟 (where rrr is the required reserve ratio: the % of deposits commercial
Money Multiplier banks must keep in their vault or as deposits in the central bank and which they
can thus not lend out)
1. Calculate cost of basket in all years: ∑𝑛𝑛𝑖𝑖=1 𝑝𝑝𝑖𝑖 𝑞𝑞𝑖𝑖 for all n goods in
basket ($ and 2dp’s)
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑖𝑖𝑖𝑖 2008
Inflation 2. Calculate CPI for, say, 2008, as × 100
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑜𝑜𝑜𝑜 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑖𝑖𝑖𝑖 𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝑌𝑌𝑌𝑌𝑌𝑌𝑌𝑌
stuff (no units but rem 2dp’s)(follows that the CPI for the base year is 100)
𝑪𝑪𝑪𝑪𝑪𝑪𝟏𝟏𝟏𝟏 −𝑪𝑪𝑪𝑪𝑪𝑪𝟎𝟎𝟎𝟎
3. Calculate inflation rate of, say, 2010, as 𝑪𝑪𝑪𝑪𝑪𝑪𝟎𝟎𝟎𝟎
× 100
(% and 2dp’s)
# 𝑜𝑜𝑜𝑜 𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈
𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈 = × 100
Unemployment Rate 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹
where Labor Force = (Employed plus Unemployed)
(% and 2dp’s)
1. Calculate tax owed for each tax bracket by multiplying the tax
rate of the bracket by the actual income earned within each
bracket
𝑇𝑇𝑇𝑇𝑇𝑇 𝛥𝛥𝑇𝑇
2. ATR = MTR = or, the tax paid on the last dollar
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼 𝛥𝛥𝑌𝑌
earned (additional tax paid on additional income)
3. Progressive: if MTR>ATR so that ATR as Y
Proportional: if MTR = ATR so ATR constant as Y
Income Tax Regressive: if MTR < ATR so that ATR as Y
Stuff 4. Indirect taxes are regressive as lower incomes pay a greater
percentage of their income in tax
5. Equity  fairness; Equality  sameness (equal)
6. If the question requires you to calculate also the indirect tax bill
of Ms Black in addition to her income tax bill and then it asks for
the combined average tax rate for Ms Black, you will add the two
tax bills and divide by her income (x100)

Lorenz, Gini and Lorenz curve stuff: A closed square with cumulative population on
inequality ratios horizontal and cumulative income on vertical
 (draw a square with the diagonal sloped like a demand curve)
Gini coefficient: the area between diagonal and the Lorenz curve
over the area of the half-square:
if Gini is 0 then perfectly equal; if it is 1 then perfectly unequal;
(actual values are between about 0.25 and 0.62)
7. If asked to construct a Lorenz curve from quintile data provided
(i.e., income of the lowest 20%, of the next 20%, of the next 20%, of
the next 20%, of the top 20%) remember that the data is
cumulative (so, compute what the bottom 20% earns, then what
the bottom 40% earns, then what the bottom 60%, then what the
bottom 80%, and then of course, 100% of the population earns
100% of national income)
{Inequality ratios: P90/P10; P75/P25: income of top 10% over
income of bottom 10%} useful to explain what rising income
inequality means ( But, not in new 2022 syllabus)
Real interest rate Real interest rate = Nominal interest rate – Inflation rate
(𝒓𝒓𝒓𝒓 = 𝒓𝒓𝒏𝒏 − 𝒑𝒑̇ )
𝛥𝛥𝑌𝑌
𝑂𝑂𝑂𝑂(𝑋𝑋) =
Opportunity Cost of 𝛥𝛥𝑋𝑋
(which, assuming that good X is depicted on the horizontal axis in a PPC diagram, is the slope
producing good X of the PPC  so, the country with the flatter PPC (assuming linear PPC) has the comparative
advantage in the production of good X) (Remember that the OC of producing an additional
unit of X is the amount of good Y sacrificed so, OC is a negative number)
Current Account Net exports + Net income from investments + Net current transfers
Balance (if this sum is negative , than CAD; if this sum is positive, then CAS)
Financial Account
Net Portfolio + Net FDI + Changes in foreign exchange reserves
Balance
CA + KA + FA must be zero
So, if we ignore the KA: CA = -FA (and - CA = +FA: meaning that a current account
BOP = 0 deficit must be somehow financed) (note that a decrease in the forex reserves of
the central bank enters the BOP with a plus sign  why? Because the money
leaves the CB and ‘enters’ the economy)
Calculations with
(use your common sense!)
exchange rates
???