A Question asked for JNU M.Phil Entrance Examination

[E A Ibrahim]

I guess this would be useful for M.A Entrance. Please provide, worked-out solution


A closed economy which has a capital-output ratio of 4 is currently growing at 6 percent
per annum with full employment. In this economy, workers do not save and 50% of
profits are saved. Also, currently the only tax in this economy is a 25% tax on profits, of
which the government uses half to carry out public investments and the other half to
provide social services to workers.
1. What is the pre-tax share of profit in the national income of this economy?
(a) 24 percent
(b) 36 percent
(c) 48 percent
(d) 60 percent
2. Suppose that the government increases the profit tax from 25% to 50%, still using half
the proceeds for public investment and half for social services. The effect will be
(a) lower investment and lower rate of growth
(b) higher investment and higher rate of growth
(c) same investment and higher provision of social services
(d) lower investment and higher provision of social services

[mrittik]

simple HD model- savings rate/(cap-output raio) = growth rate of economy => s=4*6=24..if 50% profit is saved then pre-tax share of profit in GDP=24%*2=48%.

[aman]

and the second part?

[vandita24x7]

Mrittik pls explain the reason behind u doing 24*2. Why have u multiplied with 2 ???

vandita

On 15 May 2014 18:08, "mrittik [via Discussion forum]" <[hidden email]> wrote:

simple HD model- savings rate/(cap-output raio) = growth rate of economy => s=4*6=24..if 50% profit is saved then pre-tax share of profit in GDP=24%*2=48%.

---

If you reply to this email, your message will be added to the discussion below:

http://discussion-forum.2150183.n2.nabble.com/A-Question-asked-for-JNU-M-Phil-Entrance-Examination-tp7589313p7589806.html

To start a new topic under General Discussions, email [hidden email]
To unsubscribe from Discussion forum, click here.
NAML

[vandita24x7]

Ok i got it

vandita

On 15 May 2014 19:02, "vandita mishra" <[hidden email]> wrote:

Mrittik pls explain the reason behind u doing 24*2. Why have u multiplied with 2 ???

vandita

On 15 May 2014 18:08, "mrittik [via Discussion forum]" <[hidden email]> wrote:

simple HD model- savings rate/(cap-output raio) = growth rate of economy => s=4*6=24..if 50% profit is saved then pre-tax share of profit in GDP=24%*2=48%.

---

If you reply to this email, your message will be added to the discussion below:

http://discussion-forum.2150183.n2.nabble.com/A-Question-asked-for-JNU-M-Phil-Entrance-Examination-tp7589313p7589806.html

To start a new topic under General Discussions, email [hidden email]
To unsubscribe from Discussion forum, click here.
NAML