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.