Notation: Δ means change; Q is quantity; P is price; subscripts distinguish cases. Use the stated period and units, retain useful working precision, and interpret the sign and size of the result. A formula calculation is evidence for an explanation, not a judgement by itself.
Use the formula that matches the variables in the question. Keep units and periods consistent; interpret the result in its context. Δ means change. These are core revision formulas; chapter explanations give the assumptions.
| Formula | Meaning and checks | Read more |
|---|---|---|
| Real GDP nominal GDP / GDP deflator × 100 | Money at base-year prices when the deflator has base 100. Check: The deflator must use base 100 for this version. A higher nominal GDP does not establish higher real output. | p. 6 |
| GDP per capita GDP / population | Money per person; specify real or nominal GDP. Check: Use matching population and GDP periods. A higher average does not show that every resident is better off. | p. 6 |
| Inflation rate (new CPI − earlier CPI) / earlier CPI × 100 | Percent; annual inflation compares equivalent dates one year apart. Check: CPI is the consumer price index. A lower positive inflation rate means prices are still rising, but more slowly. | p. 11 |
| Unemployment rate unemployed / labour force × 100 | Percent; labour force = employed + unemployed. Check: Exclude economically inactive people from the denominator. A falling rate can reflect a smaller labour force. | p. 16 |
| Aggregate demand C + I + G + (X − M) | Money per period; G excludes transfers and M removes foreign output. Check: C is consumption; I investment; G government purchases; X exports; M imports. Use consistent periods and currency units. | p. 32 |
| Multiplier k = 1 / MPW = 1 / (MPS + MPT + MPM) | No unit; use decimal propensities. In the simple closed no-government model, k = 1 / (1 − MPC). Check: MPS, MPT and MPM are marginal saving, tax and import propensities. MPW is their sum; these are additional proportions, not average shares. | p. 64 |
| Change in income ΔY = k × initial change in injection | Money; positive injection gives positive modelled income change, subject to capacity. Check: Δ means change; k is the multiplier. Use the initial injection once, not an amount already containing later rounds. | p. 64 |
| Output gap (actual − potential output) / potential output × 100 | Percent; positive = above estimated potential, negative = below. Check: Actual and potential output must use the same price basis. A negative result indicates actual output below estimated potential. | p. 70 |