IMP QUESTION

[vandita24x7]

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.

What is the pre-tax share of profit in the national income of this economy?

a)24 b)36 c)48 d)60

[kangkan]

Hi Vandita..my answer is 48...

Here is the working:
Assume current economy output is 100 cr. There fore current capital stock =Rs 400 Cr

since ecomomy is growing at 6%,the output next year will be 106 cr..to maintain the same capital output ratio,the new capital stock must be Rs 424 crore..

therefore investment in current year must be Rs 24 cr.

Let the profit before tax be x.

income accruing to capitalist =0.75x(tax on profit is 25%)
Savings by capitalists= 0.5*0.75x=0.375x(since they save 50% of their income)
Tax collected=0.25x
govt investment=0.5*0.25x=0.125x

Now in a closed econmoy
Savings =investment
0.375x=40-0.125x
=>0.5x=40
=>x=48

Since our assumption was output =100,the share of pretax profit to output is 48%.

I guess you can do it without the assumptions.
Thanks

[VARSHA G]

In a garden, there are three kinds of roses-red, yellow and white. No matter which 9
roses are selected at least 2 of them are white; and no matter which 10 roses are
selected at least 2 of them are yellow; and no matter which 11 roses are selected at least
2 of them are red. How many roses are there in the garden?
(a) 11
(b) " 12
(c) 13
(d) None of the above

[Sinistral]

Let there be r no. of red roses, y no. of yellow roses and w no. of white roses.
So,
r+y=7
r+w=8
y+w=9

Solving these we get: r=3,y=4,w=5.
r+y+w=12

[VARSHA G]

Thank you so much !

On Mon, Feb 17, 2014 at 4:22 PM, Sinistral [via Discussion forum] <[hidden email]> wrote:

Let there be r no. of red roses, y no. of yellow roses and w no. of white roses.
So,
r+y=7
r+w=8
y+w=9

Solving these we get: r=3,y=4,w=5.
r+y+w=12

---
 "You don't have to believe in God, but you should believe in The Book." -Paul Erdős

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NAML

--

Varsha Gupta
M.sc. Economics(4th sem)
TERI University

[vandita24x7]

Hi, Varsha, r u preparing for Mphil entrance? If so, which are the universities where u will be applying?

On Mon, Feb 17, 2014 at 9:58 PM, VARSHA G [via Discussion forum] <[hidden email]> wrote:

Thank you so much !

On Mon, Feb 17, 2014 at 4:22 PM, Sinistral [via Discussion forum] <[hidden email]> wrote:

Let there be r no. of red roses, y no. of yellow roses and w no. of white roses.
So,
r+y=7
r+w=8
y+w=9

Solving these we get: r=3,y=4,w=5.
r+y+w=12

---
 "You don't have to believe in God, but you should believe in The Book." -Paul Erdős

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NAML

--

Varsha Gupta
M.sc. Economics(4th sem)
TERI University

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[arjit shivhare]

hii,
could you (kangkan) please explain how investment is 40-0.125x ?

[2016]

Now in a closed econmoy
Savings =investment
0.375x=40-0.125x
=>0.5x=40
=>x=48  
How did we Get 40-0.125x as investment?? Can some one please answer....