All key formulas for ECON1002 / ECOS2002 โ print-friendly revision reference
National Accounts
| Formula |
Description |
| GDP = C + I + G + NX |
Expenditure approach |
| NX = X โ M |
Net exports |
| Real GDP = Nominal GDP / Price level ร 100 |
Removing inflation |
| GDP growth = (GDPโ โ GDPโ) / GDPโ ร 100 |
Annual growth rate |
| GNI = GDP + Net factor income from abroad |
Gross National Income |
| NNI = GNI โ Depreciation |
Net National Income |
Inflation & Price Level
| Formula |
Description |
| CPI = (Cost of basket / Base year cost) ร 100 |
Price level index |
| Inflation rate = (CPIโ โ CPIโ) / CPIโ ร 100 |
% change in CPI |
| Real interest rate = Nominal rate โ Inflation |
Fisher equation (approx.) |
| %ฮM + %ฮV = %ฮP + %ฮY |
Quantity theory (growth form) |
| If V, Y constant: %ฮM = %ฮP |
Money โ Inflation (long run) |
Unemployment
| Formula |
Description |
| Unemployment rate = Unemployed / Labour force ร 100 |
Standard definition |
| Labour force = Employed + Unemployed |
(Not including "not in labour force") |
| Participation rate = Labour force / Working-age population ร 100 |
|
| Okun's Law: %ฮGDP โ โ2 ร ฮunemployment rate |
Output-unemployment link |
| Output gap = (Y โ Y*) / Y* ร 100 |
% deviation from potential |
Keynesian Cross / Multiplier
| Formula |
Description |
| C = Cฬ + c(Y โ T) |
Consumption function |
| PAE = C + Iโ + G + NX |
Planned aggregate expenditure |
| Y* = A / (1 โ c + m) |
Equilibrium income (open economy) |
| Multiplier k = 1 / (1 โ c + m) |
Spending multiplier |
| k_G = 1 / (1 โ c + m) |
Government spending multiplier |
| k_T = โc / (1 โ c + m) |
Tax multiplier (negative) |
| Balanced budget multiplier = 1 |
ฮG = ฮT โ ฮY = ฮG |
Typical USYD values: c = 0.8, m = 0.1 โ k = 1 / 0.3 = 3.33
Money & Banking
| Formula |
Description |
| Money multiplier = 1 / rr |
rr = reserve ratio |
| ฮM = (1/rr) ร ฮReserves |
Deposit expansion |
| MV = PY |
Equation of exchange |
IS-LM Model
| Formula |
Description |
| IS curve: i = a โ bรY |
Downward sloping (goods market) |
| LM curve: i = cรY โ d |
Upward sloping (money market) |
| Policy reaction (Taylor Rule): i = r* + ฯ + 0.5(ฯ โ ฯ_T) + 0.5 ร output gap |
RBA reaction function |
Phillips Curve
| Formula |
Description |
| ฯ = ฯ_e โ ฮฑ(u โ u_n) |
Expectations-augmented PC |
| NAIRU (u_n) โ 4.0โ4.25% (Australia post-COVID) |
Non-accelerating inflation rate |
| Sacrifice ratio = % output lost per 1pp fall in inflation |
Cost of disinflation |
Solow Growth Model
| Formula |
Description |
| y = k^ฮฑ |
Per-worker production function |
| Steady state: sรf(k) = (ฮด + n + g)k |
Saving = break-even investment |
| k* = (s / (ฮด+n+g))^(1/(1โฮฑ)) |
Steady-state capital per worker |
| Golden rule: s_GR = ฮฑ |
Capital-share saving rate |
| Australia: sโ0.25, ฮฑโ0.35, ฮด+n+gโ0.08 โ k*โ5.77 |
Calibration |
Open Economy / Balance of Payments
| Formula |
Description |
| CA + KFA = 0 (approximately) |
BOP identity |
| (S โ I) + (T โ G) + (M โ X) = 0 |
Sectoral balances identity |
| Real exchange rate = e ร (P* / P) |
Competitiveness measure |
| Purchasing Power Parity: e = P / P* |
Long-run exchange rate |
Key Australian Data Points
| Fact |
Value |
| RBA inflation target |
2โ3% per annum |
| Current cash rate (Mar 2026) |
4.10% |
| Peak cash rate (Nov 2023) |
4.35% |
| COVID low cash rate (Nov 2020) |
0.10% |
| Australia NAIRU |
~4.0โ4.25% |
| Unemployment trough (Jan 2023) |
3.5% |
| CPI peak (Q4 2022) |
7.8% |
| AUD floated |
December 1983 |
| JobKeeper cost |
$89bn |
See also: ๐ Quizzes ยท ๐ Flashcards ยท ๐ Key Diagrams