Basic Equations Used in HSC Economics

Aggregate Demand:
AD = C+I+G+(X-M) Equilibrium:
(Derived from AD=Y)
 AD= Aggregate Demand
 C = Consumer Spending S+T+M=I+G+X
 I = Investment Spending Leakages = Injections
 G = Government Spending
 X = Exports Simple Multiplier:
𝑀𝑃𝑆 + 𝑀𝑃𝐶 = 1
M = Spending on imports
 MPC= Marginal Propensity to
Aggregate Supply: consume
Y= C+S+T  MPS=Marginal Propensity to
 Y= Aggregate Supply Save
 C=Consumer Spending 1 1
𝑘= =
 S= Household Saving 𝑀𝑃𝑆 1 − 𝑀𝑃𝐶
 M= Imports  K= Simple Multiplier
∆𝑌 = 𝑘 ∙ ∆𝐴𝐷
Economic Growth (%):
[𝑅𝑒𝑎𝑙 𝐺𝐷𝑃 (𝑐𝑢𝑟𝑟𝑒𝑛𝑡) − 𝑅𝑒𝑎𝑙 𝐺𝐷𝑃(𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠)
= ∙ 100
𝑅𝑒𝑎𝑙 (𝐺𝐷𝑃 𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠)

Inflation Rate (%):

 CPI= Consumer Price Index
𝐶𝑃𝐼(𝐶𝑢𝑟𝑟𝑒𝑛𝑡) − 𝐶𝑃𝐼(𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠)
= ∙ 100
𝐶𝑃𝐼(𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠)

Labour Force Participation Rate: Unemployment Rate:

𝐿𝑎𝑏𝑜𝑢𝑟 𝐹𝑜𝑟𝑐𝑒 𝑁𝑜. 𝑜𝑓 𝑝𝑒𝑜𝑝𝑙𝑒 𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑
= ∙ 100 = ∙ 100
𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑇𝑜𝑡𝑎𝑙 𝐿𝑎𝑏𝑜𝑢𝑟 𝐹𝑜𝑟𝑐𝑒
Balance of Payments (BOP):
Total = Credit - Debit
BOP= CA+KAFA
Current Account (CA) =
Balance of Good and Services + Net Primary Income + Net Secondary Income
=BOGS+NPY+NSY
Where BOGS = Net goods + Net services

Capital and Financial Account (KAFA) =

Capital Account + Investment

Terms of Trade Index:

𝐸𝑥𝑝𝑜𝑟𝑡 𝑃𝑟𝑖𝑐𝑒 𝐼𝑛𝑑𝑒𝑥
= ∙ 100
𝐼𝑚𝑝𝑜𝑟𝑡 𝑃𝑟𝑖𝑐𝑒 𝐼𝑛𝑑𝑒𝑥

Gini Coefficient:

𝐴
𝐺𝑖𝑛𝑖 𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 =
𝐴+𝐵