Class 12 Macro Economics Notes · CBSE
Summary of Important Formulas
Summary of Important Formulas — a quick reference of all key formulas for equilibrium output, multiplier, and related concepts. CBSE Class 12 Macroeconomics notes.
Last updated: 16 Aug 2026
Notes
Formula Reference Table
| Concept | Formula |
|---|---|
| Multiplier (k) | k = ΔY/ΔI = 1/(1-MPC) = 1/MPS |
| Aggregate Demand (AD) | AD = C + I |
| Aggregate Supply (AS) | Y = C + S |
| Equilibrium (AD-AS) | AD = AS |
| Equilibrium (S-I) | S = I |
| Consumption Function | C = c̄ + b(Y) where c̄ = Autonomous Consumption, b = MPC |
| Saving Function | S = -c̄ + (1-b)Y where -c̄ = Autonomous Saving, (1-b) = MPS |
| AD Function (Fixed Price) | AD = Ā + b(Y) where Ā = Total Autonomous Expenditure |
| Total Autonomous Expenditure | Ā = c̄ + Ī where Ī = Autonomous Investment |
| Equilibrium Income (Fixed Price) | Y = Ā/(1-b) |
Key Takeaways
Key Takeaways
- The multiplier formula has three equivalent forms: k = ΔY/ΔI, k = 1/(1-MPC), and k = 1/MPS.
- Equilibrium occurs where AD = AS (AD-AS approach) or where S = I (S-I approach) — both yield the same result.
- Under fixed prices, equilibrium income Y = A/(1-b) depends on autonomous expenditure and MPC.
- The multiplier is directly related to MPC and inversely related to MPS.
- Maximum multiplier value is infinity (MPC = 1); minimum is one (MPC = 0).
- The multiplier works symmetrically in both forward (expansion) and reverse (contraction) directions.
- Effective Demand Principle: when AS is infinitely elastic, equilibrium is determined solely by AD.
- Planned or ex-ante variables represent intentions, not actual outcomes — this distinction is exam-critical.