Cheat Sheet for AP Economics



Calculations Sheet for AP Economics Exam Review

Chapter 1:

• Slope: rise/run

• Equation of a line: y=mx+b

Chapter 2:

• Factors of Production – land labor capital entrepreneurial ability

• Factor income: WRIP

• Most optimal point of production on PPC: MB=MC

Chapter 3:

• Demand determinants: PINTE

• Supply determinants: PRENTT

• Shortage = QD-QS

• Surplus = QS - QD

Chapter 6:

• Gross Domestic Product (GDP):

o Expenditures Approach: C + Ig + Xn + G

o Income Approach: WRIPINDS

• Net Domestic Product (NDP):

o GDP – Depreciation

o C + In + Xn + G

• National Income (NI):

o WRIP

o NDP – (Net Foreign Factor + Indirect Bus. Tax)

• Personal Income (PI):

o NI – (C+U+S+I) + T

• DI:

o DI = C + S

o DI = PI – personal income taxes

• Corporate Profits = Dividends + Corp Prof Tax + Und Corp Profits

• Price Index = (price of mark basket in specific yr/price of same basket in base yr) x 100

• Real GDP = nominal GDP / price index (in hundredths)

• Xn = exports – imports

Chapter 7:

• Full Employment = frictional + structural unemployment

• Full Employment unemployment rate is achieved when: cyclical unemploy. = 0

• Unemployment Rate = (unemployed / labor force) x 100

• GDP gap = Cyclical unemployment x 2

• Rate of Inflation:

o ((This yr’s price index – Last yr’s price index) / Last yr’s price index) X 100

• Rule of 70 = 70 / Rate of Inflation

• % change in real income = % change in nominal income - % change in price level

• % change in price level = % change in nominal income - % change in real income

Chapter 8:

• DI = C + S

• S = DI – C

• APC = C/DI

• APS = S/DI

• MPC:

o Change in C / Change in DI

o Slope of C

o Slope of AE

• MPS:

o Change in S / Change in DI

o Slope of S

• Breakeven level of income: DI = C

• Equilibrium GDP:

o Leakages = injections

o Sa + Ig + M = Ig + G + X

o GDP = AE

o AE = C + Ig + G + Xn

Chapter 9:

• Multiplier:

o Change in real GDP / Initial change in spending

o 1 / MPS

o 1 / (1 – MPC)

• Change in GDP = change in AE x multiplier

• Sa = change in DI x MPS

• Ca = change in DI x MPC

• Balanced budget multiplier = 1

• Recessionary Gap or Inflationary Gap = GDP gap / multiplier

Chapter 11:

• Change in AD = change in AE x multiplier

• AE = C, Ig, G, Xn

• Budget Deficit = G > T

• Budget Surplus = T > G

Chapter 12:

• Sm = M1 + M2 + M3

• M1 = currency + demand deposits

• M2 = M1 + savings + small time deposits + money mkt mutual funds + money mkt dep accts

• M3 = M2 + large time deposits (over 100,000)

• Dm = Da + Dt

• Bond Interest Rate = bond coupon / bond price

Chapter 13:

• Assets = liability + net worth

• Required reserves = demand deposits x reserve ratio

• Excess reserves = actual reserves – required reserves

• Money creating potential = excess reserves x monetary multiplier

• Monetary multiplier = 1 / reserve ratio

• Direct change in supply of money = when DD change and don’t change elsewhere

Chapter 15/17:

• Equation of exchange: MV = PQ

Chapter 35-36:

• Cost ratio

• Terms of trade

• Trading possibilities

• Gains from trade

• World supply and demand:

o Surplus = exports

o Shortage = imports

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