To calculate the various macroeconomic indicators, we need to use the given data from the tables
provided.
1. **Gross Domestic Product (GDP):**
- **Expenditure Approach:**
GDP = C + I + G + (X – M)
Where:
C = Personal consumption expenditure = $4500 million
I = Gross domestic private investment = $300 million
G = Government expenditure on goods and services = $25 million
X = Exports = $150 million
M = Imports = $200 million
GDP = $4500 + $300 + $25 + ($150 - $200) = $4775 million
- **Income Approach:**
GDP = Compensation of employees + Gross operating surplus + Gross mixed income + Taxes on
production and imports – Subsidies
Where:
Compensation of employees = $2600 million
Gross operating surplus = Proprietors income(profits) + Rental income = $70 + $600 = $670 million
Gross mixed income = Retained corporate profit = $200 million
Taxes on production and imports = Corporate income tax + Indirect business taxes = $100 + $100 =
$200 million
Subsidies = 0 (not provided)
GDP = $2600 + $670 + $200 – 0 = $3470 million
2. **Gross National Product (GNP):**
GNP = GDP + Factor receipts from abroad – Factor payments to abroad
Where:
Factor receipts from abroad = $400 million
Factor payments to abroad = $200 million
GNP = $4775 + $400 - $200 = $4975 million
3. **Real GDP:**
Real GDP = (Nominal GDP / Price Index) * 100
Given:
Nominal GDP = $4775 million
Price Index = 11
Real GDP = ($4775 / 11) * 100 = $43318.18 million
4. **Growth Rate:**
Growth Rate = ((Real GDP current year – Real GDP previous year) / Real GDP previous year) * 100
Given:
Real GDP 2004 = $4000 million
Real GDP 2005 = $43318.18 million
Growth Rate = (($43318.18 - $4000) / $4000) * 100 = 983.95%
5. **Inflation Rate:**
Inflation Rate = ((Consumer Price Index current year – Consumer Price Index previous year) /
Consumer Price Index previous year) * 100
Given:
Consumer Price Index 2004 = 100
Consumer Price Index 2005 = 11
Inflation Rate = ((11 – 100) / 100) * 100 = -89%
6. **Personal Disposable Income:**
Personal Disposable Income = Personal income – Personal taxes – Social security contribution
Where:
Personal income = Compensation of employees + Proprietors income(profits) + Rental income +
Interest income = $2600 + $70 + $600 + $800 = $4070 million
Personal taxes = $100 million
Social security contribution = $5 million
Personal Disposable Income = $4070 - $100 - $5 = $3965 million
Therefore:
1. GDP:
- Expenditure approach: $4775 million
- Income approach: $3470 million
2. GNP: $4975 million
3. Real GDP: $43318.18 million
4. Growth Rate: 983.95%
5. Inflation Rate: -89%
6. Personal Disposable Income: $3965 million
2.1. Stages of production:
| Labor (L) | Total Product (TP) | Stage |
|0 |0 | Stage 1 |
|1 |3 | Stage 1 |
|2 |7 | Stage 1 |
|3 | 12 | Stage 2 |
|4 | 16 | Stage 2 |
|5 | 18 | Stage 2 |
|6 | 19 | Stage 3 |
|7 | 19 | Stage 3 |
|8 | 16 | Stage 3 |
Graphically, Stage 1 shows increasing returns to scale, Stage 2 exhibits diminishing returns to scale, and
Stage 3 reflects negative returns to scale.
2.2. The law of diminishing marginal returns starts to operate at Stage 2, where each additional unit of
labor contributes less to total product than the previous unit.
2.3. A rational producer should produce in Stage 2 because it is where marginal product is positive and
decreasing, indicating that each additional unit of input adds less to output, allowing the firm to
maximize profit by balancing input costs and output gains.
3.1. To find the minimum marginal cost, take the derivative of the total cost function with respect to
quantity (Q) and set it equal to zero. Then solve for Q.
3.2. To find the minimum average variable cost, divide the total variable cost by the quantity produced.
At this point, where average variable cost is minimized, marginal cost could be increasing, decreasing, or
at its minimum.
4.1. To maximize output, the firm should hire labor until the marginal product of labor (MPL) equals zero.
To find this, take the derivative of the production function with respect to labor and set it equal to zero.
Solve for L.
4.2. To maximize MPL, find the labor force size where the MPL curve intersects the x-axis. Calculate MPL
at this point, along with the corresponding total product.
4.3. To maximize average productivity of labor, find the labor force size where the average product of
labor (APL) is maximized. Calculate APL at this point, along with the corresponding total output.
4.4. At the point where MPL equals APL, both curves intersect. At this equilibrium point, MPL and APL
are neither increasing nor decreasing, and total production is maximized.
5.1. To find the profit-maximizing output, equate marginal cost (MC) to price. Then calculate the
maximum profit by subtracting total cost from total revenue.
5.2. The shutdown level of output is where price equals average variable cost (AVC). To find this, set AVC
equal to the price.
6. Discussing the macroeconomic problems in Ethiopia with real data is beyond the scope of this
response. Please consult recent economic reports or databases for up-to-date information.
