3.3 Macroeconomic objectives Questionbank

Nepal is a landlocked country in South Asia with an estimated population of 29 million. Agriculture remains central to the economy, accounting for about 27% of gross domestic product (GDP) and employing a sizeable proportion of the workforce. However, the country also relies heavily on tourism and remittances from migrant workers abroad, which make up more than 25% of Nepal’s total GDP. Nepal has been seeking to diversify its economy through foreign direct investment (FDI) in energy, infrastructure, and services.

In 2020, Nepal’s GDP stood at US$29.3 billion. By 2021, it had increased to US$30.5 billion, partly due to post-pandemic economic recovery and continued growth in the tourism sector. Official unemployment figures in Nepal are relatively low, but underemployment remains a major issue, especially in rural areas. The country’s Gini coefficient is estimated at 0.32, indicating moderate income inequality, though rural–urban disparities still persist. Nepal’s tax system includes both direct and indirect taxes; the highest marginal rate for personal income tax is approximately 30%.

The tourism sector is vital. Trekking permits, especially for the Annapurna, Everest, and Langtang regions, represent a key source of government revenue. Due to recent changes in permit fees and fluctuations in tourism numbers, local businesses have experienced varying levels of income from trekking-related services.

Table 1: Labour market data in Nepal (2021)

Table 2: Trekking permit data for Nepal

Albania is a country in Southeastern Europe with an estimated population of about 2.8 million in 2022. The Albanian economy has been transitioning from a centrally planned system to a market-based system and has experienced positive real GDP growth in recent years. Tourism is a significant contributor to Albania’s GDP, and the government has intensified efforts to promote the country’s attractions along its Adriatic and Ionian coasts.

In 2022, Albania’s unemployment rate was around 12%, partly due to structural challenges in the economy. The government operates a progressive personal income tax system, with rates ranging from 0% up to 23%. Corporate income tax is set at 15%. Value-added tax (VAT) on most goods and services stands at 20%.

Albania’s trade balance remains negative, as the country’s main exports (textiles, footwear, and mineral fuels) have not kept pace with imports (machinery, food, and manufactured goods). The government has embarked on several infrastructural projects to attract foreign investment and reduce transport costs, including a newly announced US$200 million investment in highways. Economists estimate the marginal propensity to consume (MPC) in Albania to be about 0.8.

Table 1: Selected Macroeconomic Indicators for Albania

Table 2: Tourism Data in Albania (2022)

Estonia is a small, high-income European country with a population of around 1.33 million. The Estonian economy is highly open, with exports accounting for a large share of its GDP. In 2021, Estonia’s real GDP was approximately €34.5 billion, growing by 8.0%, while the 2022 figure rose to €36.4 billion, with real GDP growth of 3.5%. Over the same period, the unemployment rate declined from 6.2% to 5.6%.

Estonia is known for its advanced digital infrastructure, which has attracted investment in technology and services. However, inflation surged in 2022 due to global supply pressures and increased energy prices. Estonia has a relatively low level of income inequality compared to many countries, as measured by its Gini coefficient, which improved slightly from 0.31 in 2021 to around 0.30 in 2022.

Estonia’s tax system is characterized by a flat personal income tax rate of 20% and a 20% corporate tax on distributed profits. The government also raises revenue through value-added tax (VAT) at 20%, excise duties, and social security contributions of 33%. The timber industry plays a significant role in Estonian exports; higher prices for timber have contributed to fluctuations in export earnings.

Below are three tables presenting selected data for the Estonian economy:

Table 1: Selected Macroeconomic Indicators for Estonia (2021–2022)

Table 2: Timber Market Data in Estonia

Table 3: Tax Revenue in Estonia (2022)

India’s economy is one of the fastest-growing in the world, yet it continues to face various challenges such as income inequality, infrastructure bottlenecks, and volatile agricultural markets. Onions, for instance, are a staple food item in India and play a significant role in the Consumer Price Index (CPI). Fluctuations in onion prices, caused by unpredictable supply shocks and strong consumer demand, can lead to rapid changes in household expenditures.

Macro Performance and Government Revenues
India’s real GDP growth slowed down in 2019; however, the economy was still thriving compared to many other emerging markets. Due to the impact of the COVID-19 pandemic in 2020, real GDP growth declined sharply, but bounced back in 2021 and remained relatively strong in 2022. The country’s population continues to grow, contributing to both challenges and opportunities for economic development. Despite a rebound in total government tax revenues (direct and indirect taxes), issues of income inequality remain significant.

Table 1 below shows selected macroeconomic indicators:

Table 1: Selected Macroeconomic Indicators for India (2019–2022)

Income Distribution
India has made strides in reducing poverty; however, income inequality remains an obstacle to equitable growth. Table 2 presents approximate data on the distribution of income by quintile in 2022:

Table 2: Income Distribution in India (2022)

Market for Onions
Onions are a basic necessity in the Indian diet, but supply constraints (such as monsoon variability and storage issues) often drive significant price volatility. Table 3 shows onion prices and daily quantities demanded in four major Indian cities:

Table 3: Onion Prices and Daily Quantities Demanded

Recently, policymakers have been studying the price elasticity of demand and supply (PED/PES) for onions in order to design more effective price stabilization policies. In Mumbai, if prices were reduced from INR 30/kg to INR 25/kg, it is estimated that daily onion consumption would rise from 900 tonnes per day to 1,000 tonnes per day.

Government Investment and the Multiplier
India’s government regularly invests in infrastructure (roads, railways, digital connectivity) to stimulate growth. Economic models suggest that such investments may have a significant multiplier effect on real GDP if the marginal propensity to consume (MPC) is high. On average, the MPC in India is estimated to be around 0.8, though regional differences exist.

Figure 1 below shows the country’s real GDP growth trend from 2019 to 2022, illustrating the sharp slowdown in 2020 and the rebound in 2021.

Figure 1: India’s Real GDP Growth from 2019–2022

• 2019: +4.0%
• 2020: –6.6%
• 2021: +8.9%
• 2022: +7.0%

Austria is a landlocked country in Central Europe with a population of approximately 9 million. It has a high-income economy, diversified across manufacturing, services, and a thriving tourism sector. During 2022, tourism alone contributed about 15% of Austria’s gross domestic product (GDP), fueled by both winter sports and year-round cultural tourism.

Austria’s real GDP growth rate moderately improved between 2019 and 2022, assisted by strong consumer demand, increasing trade with neighboring economies (most notably Germany), and an expansionary fiscal stance. Government spending on infrastructure has grown, although policy makers closely watch any inflationary pressures that could arise from such fiscal expansion.

Despite relatively low inequality levels compared to many other developed nations, Austria’s Gini coefficient has inched upward from 0.26 a decade ago to around 0.28 in 2022. Debates on whether to reform personal income tax rates or strengthen social welfare programs have gained attention.

In terms of taxation, Austria uses a progressive personal income tax system with a top marginal rate of 55%. Corporate income taxes for resident firms currently stand at 25%, although there have been proposals to reduce this rate to 22%. To stimulate the economy further, the government allocated €5 billion in 2022 toward infrastructure projects, anticipating that the Keynesian multiplier would raise overall economic activity significantly.

Table 1 below shows simplified data on the Austrian ski package market, while Tables 2–4 provide additional macroeconomic and distribution information that will be referred to in the questions.

Table 1: The Market for Austrian Ski Packages (2021–2022)

Table 2: Nominal GDP and Price Index in Austria (2019–2022)

Table 3: Selected Economic Indicators (2022)

Table 4: Income Distribution Data in Austria (2022)