ASSIGNMENT NUMBER: 1

MACROECONOMICS

Date of submission: 21-Feb-2024

Submitted To: Ms. Ayesha Arshad

Submitted By:

SANIA SHAHID

22L-6014

(BBA -4C)
QUESTION: 01

Calculation of GDP:

 Income approach:
The total value of all the incomes earned from producing goods and
Services during the year.
Wages and salaries paid 900,000
Gross operating surplus = Profits + (Profits - Dividends) = Rs. 700,000 + (Rs. 700,000 -
Rs. 400,000) = Rs. 700,000 + Rs. 300,000 = Rs. 1,000,000
Taxes less subsidies on production and imports = Taxes on labor + Taxes on the company
= Rs. 200,000 + Rs. 300,000 = Rs. 500,000
Therefore, GDP using the income approach = Rs. 900,000 + Rs. 1,000,000 + Rs.
500,000 = Rs. 2,400,000

 Expenditure approach:
The total value of expenditure on purchasing final goods and
Services during the year.
GDP = C + I + G + (X - M)
C (Consumption) = Domestic consumer's expenditure = Rs. 1,100,000
I (Investment) = Output sold = Rs. 2,000,000
G (Government spending) = Government expenditures - Taxes on labor - Taxes on
company = Rs. 500,000 - Rs. 200,000 - Rs. 300,000 = Rs. 0
X (Exports) = Rs. 400,000
M (Imports) = Raw material imports = Rs. 400,000
Therefore, GDP using the expenditure approach = Rs. 1,100,000 + Rs. 2,000,000 + Rs.
0 + (Rs. 400,000 - Rs. 400,000) = Rs. 2,700,000

 Value added approach:

The total value of final goods and services produced during the year.
GDP = Value of output - Value of intermediate consumption
Value of output = Output sold = Rs. 2,000,000
 Value of intermediate consumption = Raw material imports = Rs. 400,000
Therefore, GDP using the value-added approach = Rs. 2,000,000 - Rs. 400,000 = Rs.
1,600,000

QUESTION: 02
Calculation of GDP:

 Expenditure approach:
GDP = C + I + G + (X - M)
Where:
C = Consumers' expenditure = Rs. 16,500 million
I = Investment = Sales value of output of firms - Profit before tax of firms = Rs. (30,000 -
10,500) million = Rs. 19,500 million
G = Government expenditure = Rs. 7,500 million
X = Exports = Rs. 6,000 million
M = Imports = Rs. 6,000 million

Therefore,
GDP = 16,500 + 19,500 + 7,500 + (6,000 - 6,000)
= 16,500 + 19,500 + 7,500 + 0
= Rs. 43,500 million

 Income approach:
GDP = Compensation of employees + Gross operating surplus + Gross mixed income +
Taxes less subsidies on production and imports
Where:
Compensation of employees = Wages etc. received by employees - Tax deducted out of
wages
= Rs. (12,000 - 1,500) million
= Rs. 10,500 million
 Gross operating surplus = Profit before tax of firms
= Rs. 10,500 million
Taxes less subsidies on production and imports = 0 (given no information provided)

Therefore,
GDP = 10,500 + 10,500 + 0
= Rs. 21,000 million

 Value added approach:

GDP = Value of output - Value of intermediate consumption
Where:
Value of output = Sales value of output of firms
= Rs. 30,000 million
Value of intermediate consumption = Cost of goods and services purchased from outside
country firms + Taxes less subsidies on production and imports (which is assumed to be
zero)
= Rs. (6,000 + 0) million
= Rs. 6,000 million

Therefore,
GDP = 30,000 - 6,000
= Rs. 24,000 million