Formula Sheet- Comps - Summary Finance PDF

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Formula Sheet- Comps GDP Formulas  Output Expenditure: GDP=C+I+G+(X-M)  S=I in a closed economy  S= I+NX in an open economy Multipliers:  MPC=1-MPS  MPC= Change in Consumption/Change in Income  MPS=1-MPC  Spending Multiplier= Government Spending Multiplier=Investment Multiplier = 1/(1-MPC)= 1/MPS  Balanced Budget Multiplier= 1 Inflation  Inflation = Nominal % change – Real % change  Real % Change = Nominal % change – Inflation  CPI= (New Market Basket Value/ Base Market Value Basket)*100  Deflator= (Nominal Value/ Real Value)*100  Inflation Rate= {(New Index- Old Index)/ Old Index} *100  Inflation Rate (CPI)= {(CPI Current Year-CPI Old Year)/ CPI Old Year} *100  Real Value= {Nominal Value/ Index} *100 Interest Rate  Real Interest Rate= nominal interest rate- inflation rate Unemployment  Unemployment Rate= (# of unemployed/ Labor Force)*100  Labor Force Participation Rate= (Labor Force/ Adult Population)*100 Banking Formulas  Money Multiplier= 1/ Reserve Requirement  Quantity of Money Theory: Nominal GDP= M*V=P*Y

Time Value of Money

 Future Value= PV(1+r)n  Present Value= FV/ (1+r)n Comparative Advantage Formulas  Absolute Advantage: Can produce more unites with the same amount of inputs or produce the same amount with fewer inputs has an absolute advantage  Comparative Advantage: Can produce a good or service at a lower opportunity cost Elasticity Formulas Q 1−Q 0 Q1+Q 0 /

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Price Elasticity: n=

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Income Elasticity:

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Cross-Price Elasticity

P 1− P 0 P 1+ P 0

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 n>1: elastic demand  n private cost Positive Externality: social cost private benefit

Quant Formulas  Z- score: X- x / Sx  Correlation: Sxy/ SxSy  Expected Value: xiP(xi)  Central Limit Theorem: As the sample size increase, the distribution approaches a normal distribution  Confidence intervals: x +/- Z α/2 (σ / (sqrt(n)) Hypothesis Testing  Zstat= x − μ / σ / (sqrt(n)  Null and alternative hypothesis  Reject the null if p-value is less than the significance level  Reject the null if z>z* Regression    

Residual: Yi- ŷi R2= SSR/SST= 1- SSE/SST Regression Test Staisti: T= b1- β*1/ standard error Dummy Variable takes on value 1 or 0...