ECO403 Assignment No 01 Solution Spring 2013

DUE DATE: 07TH MAY, 2013
MARKS: 20
ASSIGNMENT:
The Case:
Gambia is a country located in West Africa. It is surrounded by Senegal, apart from a short strip
of Atlantic coastline at its western end. It is the smallest country on mainland Africa. Major
exportable products are fish, cotton, peanuts and peanuts products and its exports partners are
Hong Kong, Spain and France while importable items are fuel, machinery and manufacturing.
Agriculture accounts for 25% of Gross Domestic Product and employs 70% of the total labor
force. Hypothetical data on growth rate, inflation, population and labor force of Gambian
economy for year 2007 and 2008 is given below:
Years Growth rate Inflation rate Population Labor force Unemployed
2007 4.7% 7% 900000 700000 79000
2008 5.1% 7.2% 1000000 800000 49000
Suppose after analyzing data for the year 2007, economists of Gambia suggested to work on
exportable industries in order to have better growth rates in upcoming years. This strategy
changed the overall economic situation and components of Gross Domestic Product (GDP) for
year 2008. Comparative statistics of the economy of Gambia for both years is given below:
Years Consumption
Expenditures
(Millions
Rupees)
Investment
Expenditures
(Millions
Rupees)
Government
expenditure (Millions
Rupees)
Exports
(Millions
Rupees)
Imports
(Millions
Rupees)
2007 1700 100 700 250 450
2008 1900 150 900 450 750
Due to this strategy, not only exports of Gambian economy increased but unemployment rate
also decreased. This decrease in unemployment rate compelled the other sectors to restore and
the concomitant repercussions were more industry, production, investment, consumption
particularly and improved living standard generally.
Requirements:
With the help of above data, calculate Gambian economy's:
a. Gross Domestic Product (GDP) for year 2007.
b. Net exports (NX) for the year 2008.
c. Unemployment rate for the year 2007 and 2008.
d. GDP deflator for the year 2008 if real GDP and Nominal GDP for this year are RS.2500
million and Rs.2650 million respectively.
Note: Write down formula and all relevant steps involved in calculations
Marks: (5+4+6+5)

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