DSE 2012 paper discussion-Please join

[kangkan]

@46..there will be a stationary point at x=0 also

[kangkan]

@45...for any C belonging to R++ ,plot x+y+xy=C or y= C-x/1+x..you will see that only Set U is convex...

[kangkan]

please help with the marshall lerner ones..thanks :)

[Akshay Jain]

In this first of all you have to find how the real exchange rate is defined
the net exports (exports-imports) is calculated in terms of domestic goods
so the term NX=X-IM/e is in terms of domestic goods
X are in terms of domestic goods and IM are in terms of foreign goods
so to convert Imports in terms of domestic goods we divide it by real ex rate
From this try to find whether e=foreign goods/domestic goods or e=domestic goods/foreign goods....??
and then the defination of e in terms of nominal ex rate and ratio of prices.

[kangkan]

@46..sorry ..i made a msitake earlier..here is the graph...the function will the the green portions from -3 to -1 and the blue graph from -1 to 2

u will see that there are two local maximums/minimums(incidently none of them are stationary points)

[phelps.phan]

thanks kangkan

[ashutosh]

Hey Vaibhav.

Can u explain how did u get this probability- 6/16  10/16

For q44.....when system of equations is homogeneous then there can be only two possibilities for solution, a unique solution (x=0) and infinitely many solutions(x≠0)
If A is coefficient matrix and x is variable vector ie Ax=0
This can be only satisfied when x=0 A≠0, the case of unique solution and when x≠0 then A=0 ie the case of infinitely many solutions
Probability of unique solution ie x=0 A≠0 is 6/16
Probability of infinitely many solutions A=0, is 10/16
For atleast one solution,  6/16 +10/16 =1

[sarawagisruti]

Hi Akshay,

In this case epsilon=P/EP* so what would be the Marshall Lerner condition in this case? would it be dNX/d(epsilon) >0 or would it be <0 and why?

Please help I have already spent hours on this question..

 

[xyz123]

How to do ques 23?
My Q1 = 10, Q2= 7, but firm 1 cannot produce 10. What price will each firm quote? And will firm 2 produce rest of the quantity of firm 1?

Thanks

[neha:)]

Please help me with 36, 37, 39. (Series01)

[Granpa Simpson]

Q39) Type1 Error: reject H0 when it is actually true which is given by alpha(a).
Now a=Pr(X<k),
thus 0.09=k^2 (integrating the function in H0 over [0,k]).
thus k=0.3.
Now type 2 error: Accept H0 when it is actually false.
So here we will have to find out the probability of H0 being false/ reject alternative hypothesis when it is actually true.
Now Pr(X>K) for the function in H1 over [k,1]=[0.3,1]=0.49=type 2 error.

[Akshay Jain]

@sarawagisruti
the real ex rate (e) in this ques is defined as foreign goods/domestic goods. Then only if we divide IM by e we will get the value of imports in terms of domestic goods (X-IM/e => trade balance in terms of domestic goods)
accordingly e=EP/P* where E=foreign currency/domestic currency (say $/Rs)
so a rise in e is associated with an real appreciation of domestic currency and a fall in e is real depreciation of domestic currency.

[sarawagisruti]

Hi,

In this case what should the ML condition be. I took E= Rs/dollar so now what would be the Marshall lerner condition so then epsilon is P*/EP.

[Akshay Jain]

since e=$/Rs and ML condition is satisfied
It implies that dNX/de<0 (a small increase in e is real appreciation which implies worsoning of TB)

[sarawagisruti]

Even I thought so, but if I take this as the ML condition the answer to question 58 is coming out to be b) but sir has given a) as the answer. Could you please solve this set once Q 58-60 of 2012 paper.

[Akshay Jain]

yes 58 is coming out -vly sloped schedule by logic as well as by mathematics......actually 1 of my snrs also (passed out) solved this question and he is also getting the same ans.....i dont no vy dse has given (a) as the correct option

[sarawagisruti]

yes actually it should be negatively sloping but then again if we take it as -ve sloping there might be no solution to question 60.

[Akshay Jain]

For 60 u got 2 equations
1. Y=IS(e), IS relation Y as a function of e
2. Y=LM(e), LM relation Y as a function of e
now for eqm value of e, equate above equations IS(e)=LM(e)
and den find out from this de/dG and de/dMbar
figure out the signs of above 2 partial derivatives and u vl get ur answer

[sarawagisruti]

Haan..Thanks Akshay

[Dreyfus]

Hi Akshay for q59 ....the uncovered interest parity as defined by Blanchard is where the exchange rate E is defined as Foreign currency/home currency is the same which is given in the question
And the equation of interest parity in the question is
But why the sign with change in exchange rate differs? M I missing something here? Plz help