Important Formulas in Macroeconomics | Class 12 - Coding

Chapter: Introduction

1. Net Investment

Net Investment = Gross Investment – Depreciation

2. Net Indirect Tax

Net Indirect Tax = Indirect Taxes – Subsidies

3. Market Price

Market Price = Factor Cost + Net Indirect Taxes

= Factor Cost + (Indirect Taxes – Subsidies)

4. Net factor Income from Abroad (NFIA)

Net Factor Income from Abroad = Factor income earned from abroad – Factor income paid abroad

Net Factor Income from Abroad = Net Compensation of Employees + Net Income from Property and Entrepreneurship + Net Retained Earnings

5. National Income (using NFIA)

National Income = Domestic Income + NFIA

7. Leakages in Different Types of Economies

Leakages in Different Types of Economies
Two-Sector Economy (with Financial Market)	Savings
Two-Sector Economy (without Financial Market)	No Leakages
Three-Sector Economy	Savings + Taxes
Four-Sector Economy	Savings + Taxes + Imports

8. Injections in Different Types of Economies

Injections in Different Types of Economies
Two-Sector Economy (with Financial Market)	Investment
Two-Sector Economy (without Financial Market)	No Injection
Three-Sector Economy	Investment + Government Expenditure
Four-Sector Economy	Investment + Government Expenditure + Exports

Chapter: National Income Accounting

1. National Income and Related Aggregates

Gross Domestic Product at Factor Cost (GDP_FC)

GDP_FC = GDP_MP – Net Indirect Taxes

Net Domestic Product at Market Price (NDP_MP)

NDP_MP = GDP_MP – Depreciation

Net Domestic Product at Factor Cost (NDP_FC) or Domestic Income

NDP_FC = GDP_MP – Net Indirect Taxes – Depreciation

Gross National Product at Market Price (GNP_MP)

GNP_MP = GDP_MP + Net Factor Income from Abroad

Gross National Product at Factor Cost (GNP_FC)

GNP_FC = GNP_MP – Net Indirect Taxes

Net National Product at Market Price (NNP_MP)

NNP_MP = GNP_MP – Depreciation

Net National Product at Factor Cost (NNP_FC) or National Income

NNP_FC = GNP_MP – Net Indirect Taxes – Depreciation

2. Domestic Income

Income from Domestic Product accruing to Private Sector = NDP_FC – Income from Property and Entrepreneurship accruing to Government Administrative Departments – Savings of Non-Departmental Enterprises

3. Private Income

Private Income = Factor Income earned (within domestic territory + from rest of the world) + Transfer Income received (within domestic territory + from rest of the world)

= Income from Domestic Product Accruing to Private Sector + NFIA + Interest on National Debt + Current Transfers from Government + Net Current Transfer from Rest of the World

4. Personal Disposable Income

Personal Disposable Income = Personal Income – Personal Taxes Miscellaneous Receipts of Government

= Personal Consumption Expenditure + Personal Savings

5. National Disposable Income

National Disposable Income = National Income + Net Indirect Taxes + Net Current Transfers from the rest of the world

= National Consumption Expenditure + National Savings

6. Gross National Disposable Income

Gross National Disposable Income = Net National Disposable Income + Depreciation

7. Product or Value Added Method of calculating National Income

GDP_MP using Value Added Method

∑GVA_MP = GDP_MP

Value Added

Value Added = Value of Output – Intermediate Consumption

Value of Output when the whole output is sold in a financial year

Value of Output = Sales

Value of Output when the whole output is not sold in a financial year

Value of Output = Sales + Change in Stock
Change in Stock = Closing Stock – Opening Stock

Value of Output

Value of Output = (Quantity × Price) + Change in Stock

National Income using Value Added Method

National Income or NNP_FC = GDP_MP – Depreciation – Net Indirect Taxes + NFIA

= Domestic Income or NDP_FC + NFIA

8. Expenditure Method of calculating National Income

GDP_MP using Expenditure Method

GDP_MP = ∑ Final Expenditure

∑ Final Expenditure = Private Final Consumption Expenditure (PFCE) + Government Final Consumption Expenditure (GFCE) + Gross Domestic Capital Formation (GDCF) + Net Exports (NX)

Private Final Consumption Expenditure (PFCE)

PFCE = Household Final Consumption Expenditure + Non-profit Private Institutions Final Consumption Expenditure

Government Final Consumption Expenditure (GFCE)

GFCE = Intermediate Consumption of Government + COE paid by Government +Direct purchases from abroad for embassies and consulates located abroad – Sale of goods and services produced by general government

Gross Domestic Capital Formation (GDCF)

GDFC = Gross Fixed Capital formation + Inventory Investment
or

= Gross Business Fixed Investment + Gross Residential Construction Investment + Gross Public Investment + Inventory Investment

Net Exports (X – M)

Net Exports = Exports – Imports or (X-M)

National Income using Expenditure Method

National Income or NNP_FC = ∑Final Expenditure or GDP_MP – Depreciation – Indirect taxes + NFIA

= Domestic Income or NDP_FC + NFIA

9. Income Method of calculating National Income

Profit

Profit = Corporate Tax + Dividend + Retained Earnings

Operating Surplus

Operating Surplus = Rent + Royalty + Interest + Profit

= Value of Output – Intermediate Consumption – Compensation of Employees – Mixed Income – Consumption of Fixed Capital – Net Indirect Taxes

National Income using Income Method

NNP_FC = NDP_FC + NFIA

Where,

NDP_FC = Compensation of Employees + Profit + Rent & Royalty + Interest + Mixed income

10. National Income at Constant Price

$National~Income~at~Constant~Price=\frac{National~Income~at~Current~Price}{Current~Price~Index}\times{100}$

11. Nominal GDP or GDP at Current Price

$Nominal~GDP=\frac{Real~GDP\times{Price~Index}}{100}$

12. Real GDP or GDP at Constant Price

$Real~GDP=\frac{Nominal~GDP}{Price~Index}\times100$

13. GDP Deflator

$GDP~Deflator~(or~Price~Index)=\frac{Nominal~GDP}{Real~GDP}\times100$

Chapter: Money and Banking

1. Measures of Money Supply

M₁

M₁ = Currency and coins with public + Demand deposits of commercial banks + Other deposits with Reserve Bank of India

M₂

M₂ = M₁ + Savings Deposits with Post Office Saving Bank

M₃

M₃ = M₁ + Net Time Deposits with Banks

M₄

M₄ = M₃ + Total Deposits with Post Office Saving Bank

2. Money Multiplier

$Money~Multiplier=\frac{1}{LRR}~or~\frac{1}{r}$

Chapter: Determination of Income and Employment

1. Aggregate Demand

Aggregate Demand (AD) = C + I + G + (X – M)

= Private Consumption Expenditure + Investment Expenditure + Government Expenditure + Net Exports (Exports – Imports)

2. Aggregate Supply

Aggregate Supply (AS) or National Income (Y) = Consumption (C) + Saving (S)

3. Consumption Function

C = f(Y)

Where,

C = Consumption

f = Functional Relationship

Y = National Income

4. Average Propensity to Consume (APC)

$Average~Propensity~to~Consume~(APC)=\frac{Consumption~(C)}{Income~(Y)}$

5. Marginal Propensity to Consumer (MPC)

$Marginal~Propensity~to~Consume~(MPC)=\frac{Change~in~Consumption~(\Delta{C})}{Change~in~Income~(\Delta{Y})}$

6. Saving Function

S = f(Y)

Where,

S = Saving

f = Functional Relationship

Y = National Income

7. Average Propensity to Save (APS)

$Average~Propensity~to~Save~(APS)=\frac{Saving~(S)}{Income~(Y)}$

8. Marginal Propensity to Save (MPS)

$Marginal~Propensity~to~Save~(MPS)=\frac{Change~in~Saving~(\Delta{S})}{Change~in~Income~(\Delta{Y})}$

9. Relationship between APC ad APS

APC + APS = 1

10. Relationship between MPC and MPS

MPC + MPS = 1

11. Values of APC, APS, MPC, and MPS

Value	APC	APS	MPC	MPS
Negative (less than zero)	APC can never be less than zero, because of the presence of $\bar{c}$	APS can be less than zero when C>Y; i.e., before Break-even Point.	MPC can never be less than zero, as $\Delta{S}$ can never be more than $\Delta{Y}$	MPS can never be less than zero, as $\Delta{C}$ can never be more than $\Delta{Y}$
Zero	APC can never be zero, because of the presence of $\bar{c}$	APS can be zero when C=Y; i.e., at Break-even Point.	MPC can never be zero, when $\Delta{S}=\Delta{Y}$	MPS can never be zero, when $\Delta{C}=\Delta{Y}$
One	APC can be one when C=Y; i.e., at BEP	APS can never by one as savings can never be equal to income	MPC can never be zero, when $\Delta{C}=\Delta{Y}$	MPS can never be zero, when $\Delta{S}=\Delta{Y}$
More than One	APC can be more than one when C>Y; i.e., before Break-even Point.	APS can never be more than one as savings can never be more than income	MPC can never be less than zero, as $\Delta{C}$ can never be more than $\Delta{Y}$	MPS can never be less than zero, as $\Delta{S}$ can never be more than $\Delta{Y}$

12. Equation of Consumption Function

$C=\bar{c}+b(Y)$

Where,

C = Consumption

$\bar{c}=Autonomous~Consumption$

b = MPC

Y = Income

13. Equation of Saving Function

$S=-\bar{c}+(1-b)Y$

Where,

S = Saving

$-\bar{c}=Amount~of~negative~saving~at~zero~income~level$

1-b = MPS

Y = Income

14. Marginal Efficiency of Investment (MEI)

$Marginal~Efficiency~of~Investment~(MEI)=\frac{Prospective~Yield}{Supply~Price}\times{100}$

15. Two Approaches for Determination of Equilibrium Level

Aggregate Demand-Aggregate Supply Approach (AD-AS Approach): Equilibrium will be achieved when,

AD = AS

Saving-Investment Approach (S-I Approach): Equilibrium will be achieved when,

S = I

16. Investment Multiplier

$k=\frac{\Delta{Y}}{\Delta{I}}$

OR

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

$k=\frac{1}{MPS}$

The maximum value of the Multiplier is ∞ when MPC = 1

The minimum value of Multiplier is 1 when MPC = 0

Chapter: Government Budget and the Economy

1. Measures of Government Deficit

Revenue Deficit

Revenue Deficit = Revenue Expenditure – Revenue Receipts

Fiscal Deficit

Fiscal Deficit = Total Expenditure – Total Receipts (except borrowings)

= (Revenue Expenditure + Capital Expenditure) – (Revenue Receipts + Capital Receipts excluding Borrowings)

= (Revenue Expenditure – Revenue Receipts) + (Capital Expenditure – Capital Receipts excluding Borrowings)

= Revenue Deficit + (Capital Expenditure – Capital Receipts excluding Borrowings)

Primary Deficit

Primary Deficit = Fiscal Deficit – Interest Payment

Chapter: Balance of Payments

1. Balance of Trade

Balance of Trade = Exports of Goods – Imports of Goods

2. Balance on Current Account

3. Balance on Capital Account

Elevate your coding journey with a Premium subscription. Benefit from ad-free learning, unlimited article summaries, an AI bot, access to 35+ courses, and more-available only with GeeksforGeeks Premium! Explore now!

Reffered: https://www.geeksforgeeks.org

Macroeconomics

Related
Difference between Direct and Indirect Tax
CBSE Class 12 Macroeconomics Notes
Classification of Money
Income Method of calculating National Income
Difference between Nominal GDP and Real GDP

Type:	Geek
Category:	Coding
Sub Category:	Tutorial
Uploaded by:	Admin
Views:	12