{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

List of equations from Chapter 17

# List of equations from Chapter 17 - Real interest rate =...

This preview shows page 1. Sign up to view the full content.

List of equations from Chapter 17 1) Velocity: V= PY/ M Where P =price level = GDP deflator Y = output = real GDP PY = nominal GDP M = money stock or money supply 2) Quantity equation: M V = PY 3) Quantity equation in variations (approximation): Percentage change in M + Percentage change in V = Percentage change in P + Percentage change in Y Where: Percentage change in M is also called money growth rate Percentage change in P is also called inflation Percentage change in Y is also called economic growth rate or rate of growth of output (or real GDP) 4) Nominal and interest rates: Nominal interest rate = real interest rate + inflation
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Real interest rate = nominal interest rate – inflation 5) Taxes and interest rates Let tax denote the tax rate. For example if the tax rate is 20%, then tax = 0.20; if the tax rate is 40%, then tax = 0.4. Then, After tax nominal interest rate = (1- tax) (before tax nominal interest rate) After tax real interest rate = (after tax nominal interest rate) – (inflation rate) 6) Fisher effect: the one-to-one adjustment between the nominal interest rate and the inflation rate. This is an application of money neutrality. It only applies to the long run....
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern