Economics · Topic Cheatsheet

Unit 3 · Macroeconomics

11 key results accumulated across 2 chapters.

GDP (expenditure)

Ch 1

\text{GDP} = C + I + G + (X - M)

Real vs nominal

Ch 1

Real GDP adjusts for inflation; nominal uses current prices.

Real GDP

Ch 1

\text{Real GDP} = \frac{\text{Nominal GDP}}{\text{deflator}} \times 100

AD–AS

Ch 1

AD =

C+I+G+(X-M)

; LRAS vertical at potential output.

GDP limitations

Ch 1

Ignores inequality, environment, unpaid/informal work, well-being.

Monetary policy

Ch 2

Central bank sets interest rate. Cut ⇒ ↑C,↑I ⇒ AD right. Tools: rates, OMO, QE.

Fiscal policy

Ch 2

Govt spending & taxation. Expansionary: ↑G / ↓T ⇒ AD right.

Multiplier

Ch 2

k = \frac{1}{1-MPC}

Automatic stabilisers

Ch 2

Progressive tax + benefits dampen the cycle automatically.

Supply-side

Ch 2

Shift LRAS right (education, infrastructure, tax/deregulation) ⇒ growth without inflation.

Crowding out

Ch 2

Govt borrowing can raise rates and reduce private investment.