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Macroeconomic Analysis and Calculations

This document contains 3 individual assignments on macroeconomic concepts with calculations: 1) Calculation of macroeconomic indicators like GDP, GNP, NNP, national income, disposable income, and savings for a hypothetical economy. Per capita income is calculated to be $46 per person. 2) Calculation of employment and unemployment rates, labor force participation, and types of unemployment for a country based on population data. 3) Calculation of real GDP from nominal GDP using a GDP deflator. The real GDP growth rate between 2013-2014 is calculated as 40%, indicating economic improvement.

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Mekuriya Berega
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21 views2 pages

Macroeconomic Analysis and Calculations

This document contains 3 individual assignments on macroeconomic concepts with calculations: 1) Calculation of macroeconomic indicators like GDP, GNP, NNP, national income, disposable income, and savings for a hypothetical economy. Per capita income is calculated to be $46 per person. 2) Calculation of employment and unemployment rates, labor force participation, and types of unemployment for a country based on population data. 3) Calculation of real GDP from nominal GDP using a GDP deflator. The real GDP growth rate between 2013-2014 is calculated as 40%, indicating economic improvement.

Uploaded by

Mekuriya Berega
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Defense University,

College of Health Science


Introduction to Economics (Econ 2010)
Individual Assignment-2 (10%)
1. Given the following macroeconomic variables of a hypothetical economy X country,
calculate the following parameters of the economy. (4%)
Total consumption (C) 2600
Total Investment (I) 1000
Total Government spending (G) 800
Total Export(X) 600
Total Import (M) 400
Depreciation(D) 150
Indirect business tax (IBT) 200
Subsidy (S) 100
Transfer payment (TP) 100
Net interest income (NIT) 50
Social security contribution (SSC) 50
Corporate income tax (CIT) 50
Retained earnings (RE) 50
Citizens’ earnings from abroad (R) 250
Foreigners’ earnings from domestic economy (P) 200
Personal income tax (PIT) 100

a) GDP =C+I+G+ (X-M)


=2600+1000+800+(600-400)
=4600
b) GNP= GDP + (R-P)/NFI
=4600+(250-200)
=4650
c) NNP =GNP-D
=4650-150=4500

d) National income=NI=NNP-IBT+S
=4500-200+100
=4400
e) Personal income =PI= NI-(RE+SSC+CIT) + (TP+NII)
=4400-(50+50+50) + (100+50)
=4400
f) Disposable income = PI-PIT = 4400-100
= 4300
g) Saving of the economy= DI-C
=4300-2600
=1700
h) If total population was 100 million in the given year, calculate per capita income.
PCI=GDP/100= 4600/100 = 46$ each person income for a year.
2. Consider the following population figures of a country.

Total population 100 millions


Total labor force 60 millions
Total Unemployment 25 millions
Structural unemployment 12 millions
Frictional unemployment 8 millions
Based on the above information, answer the following unemployment parameters.
a) What is the total employment of the country?
Total Employed= Total Labor Force-Total Unemployed
= 60-25=35 MILLION
b) Calculate the total population not included in labor force.
Excluded Labor Force=Total Population – total Labor Force
=100-60= 40 MILLION
c) Calculate the employment and unemployment rate of the country?
Employment Rate = 35/60 *100=58.3%
Unemployment Rate=25/60*100=41.7%
d) Calculate the normal or natural unemployment level?
Natural Unemployed=Structural unemployment + Frictional unemployment
= 8+12=20 MILLION
e) Calculate the cyclical unemployment?
Cyclical Unemployed=Total Unemployed-Natural Unemployed
=25-20=5 MILLION
f) Is the country at full employment level? Why?
Not, because the natural unemployment is more than the natural unemployment and the
cyclical unemployment is not zero so the country is not on full employment.
3. If nominal GDP of a country in year 2013 was estimated as 150 billion Birr and the GDP
deflator for the year was 1.5;
a) Calculate the real GDP of the economy in the year 2013.
Real GDP=NGDP/GDP DEFLATOR
=150/1.5=100 BILLION
b) If in the year 2014 the real GDP was estimated as 140 billion Birr, taking 2013 as a base
year, calculate the real economic growth rate of the country in the year 2014.
REAL GROTH RATE = RGDP 2014 - RGDP 2013/ REAL GDP 2013*100
=140-100/100*100=40%
c) Was the economy deteriorated or improved? Why?
The result is positive economy has improved this year 2014 than 2013 real GDP grows from
year 2013 to 2014 by 40billion.

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Full employment is assessed by determining if only natural unemployment exists (i.e., cyclical unemployment is zero). In the hypothetical economy, total unemployment is 25 million, natural unemployment is 20 million, thus cyclical unemployment is 5 million. Since cyclical unemployment is not zero, the country is not at full employment .

Per capita income is calculated by dividing GDP by the total population. For the hypothetical economy, GDP = 4600 and the total population is 100 million. Therefore, Per Capita Income = 4600 / 100 = $46 per person annually .

The GDP is calculated using the formula GDP = C + I + G + (X-M). Given the values: Total consumption (C) = 2600, Total Investment (I) = 1000, Total Government spending (G) = 800, Total Export (X) = 600, Total Import (M) = 400, the GDP = 2600 + 1000 + 800 + (600 - 400) = 4600 .

To calculate the employment rate, first determine the total number of employed individuals. Subtract the total unemployed (25 million) from the total labor force (60 million), resulting in 35 million employed. Employment rate = (Total Employed / Total Labor Force) * 100 = (35 / 60) * 100 = 58.3% .

Savings is calculated by subtracting total consumption from disposable income. With Disposable Income = 4300 and Total Consumption = 2600, savings = 4300 - 2600 = 1700. This reflects the savings rate as a portion of disposable income not spent, indicative of potential investment capacity and economic health .

Subsidies affect national income as they are added after adjusting the Net National Product (NNP) by removing indirect business taxes. The national income is calculated as NI = NNP - IBT + S. With IBT = 200 and S = 100, the impact is that subsidies increase national income, compensating for taxes withdrawn, making NI = 4400 .

Natural unemployment is calculated by summing structural unemployment and frictional unemployment. For the given data: Structural unemployment = 12 million, Frictional unemployment = 8 million, Natural Unemployed = 12 + 8 = 20 million. The significance lies in understanding full employment, which occurs when cyclical unemployment is zero. Since natural unemployment is greater than cyclical, the country is not at full employment .

Real GDP is calculated using the formula: Real GDP = Nominal GDP / GDP Deflator. For 2013, using a nominal GDP of 150 billion Birr and a GDP deflator of 1.5, Real GDP = 150 / 1.5 = 100 billion Birr .

The real economic growth rate is calculated using the change in real GDP: Growth Rate = ((Real GDP 2014 - Real GDP 2013) / Real GDP 2013) * 100. With Real GDP in 2013 = 100 billion Birr and Real GDP in 2014 = 140 billion Birr, Growth Rate = ((140 - 100) / 100) * 100 = 40%. The economy improved as the result is positive .

GNP is derived from GDP by adding net factor income from abroad: GNP = GDP + (R - P). Using the values: GDP = 4600, citizens' earnings from abroad (R) = 250, and foreigners' earnings from domestic economy (P) = 200, GNP = 4600 + (250 - 200) = 4650 .

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