Cheat Sheet for AP Economics - Northern Highlands Regional ...
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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