MARKS: 20
The Case:Economy of Pakistan is facing many problems at a time. Top most economic
issues are poverty, energy crisis, unemployment, inflation and slow growth rate.
To combat these problems of plummeted economy, economist’s team collected
previous year’s data. On the basis of this data, they will decide to take whopping
step to solve these economic problems. Hypothetical data of Pakistan’s economy
is given below:
Title of account Amount in Billion Rs.
Corporate profit 200
Social Insurance contribution 250
Net interest 350
Exports 100
Dividends 100
Govt. Transfer to individual 50
Personal interest Income 40
Personal Tax 410
National income 1500
In that year, adult population and labor force were 700000 and 60000 respectively.
Population growth rate of the economy was 1.80% or 0.018. To make policies for
implementation, analytical reports containing calculations are needed.
Requirements:
Part A:
Using above data, calculate:
a. Personal income
b. Personal disposable income
c. Labor force participation rate
Part B:
Suppose, marginal propensity to consume (MPC) of the economy is 0.90, how
much income will change if taxes are increased by Rs.10 billion.
(Note: Write down all relevant steps involved in calculation)
(Marks =5+5+5+5)
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