ECO403 Macroeconomics GDB 1 Solution Spring 2014

The Case:

Suppose HUMANITY is one of the top leading non-profit welfare organizations. Vital target of this organization is to create not only awareness but also to curtail the economic and other serious issues facing the nation. The foundation has over 70,000 centers across the country providing first aid, meal, employment, basic education and easy installment loans. Seven hospitals of cancer disease and food supplies center are also under the supervision of this organization. Foundation target is to decrease at least 1% unemployment this year out of total labor force.  Furthermore, one of the important policies of this organization is that all the equipment either sewing machine or rickshaws will be purchased from the domestic market. At the end of June 2015, this organization will collect Rs.100 billion and will spend 43% on meal, 10% for the medical and emergency service, 7% on training and workshops, 21% on easy installment loans, 9% for self-employment awareness programs and 10% on cottage scale industry.

Requirement:

Being a student of macroeconomics, analyze the above scenario and discuss what will be the impact of actions of non-profit organization on domestic investors and on overall macroeconomic indicators.

Solution:  By Purchasing all equipments from the domestically ,  the demand of Commodities will increase and if the demand will increased then Supply of Equipments must be increased (If Supply does not increase it will produce the disequilibrium in marker) if Both the Aggregate Demand & Aggregate Supply is increased so its impact increases the National Income.

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