JNU DOUBTS

[ViV]

A.bmp
B.bmp
c.bmp
Please explain your workings too...

[Granpa Simpson]

the answer to Q18 will be (a)..this can be explained by the fact that since interest rates are zero, so people will prefer to hold money..also if there is an increase in G, there will be increase in Y without any crowding out and as a result according to the function (M/P)=kY (liquidity preference theory) there will be an increase in the demand for money....!!!!..also you can answer this by eliminating the options..b cannot be as in a liquidity trap position fiscal policy will be ineffective in raising r as the LM curve is horizontal, c) savings cannot increase as well because interest rates are too low close to zero, d) increase in investment implies decrease in r, it cannot happen in liquidity trap...so a seems to be the possible answer..isnt it so..??

[Homer Simpson]

A.2 (b) - plug in some numbers. if you can disprove (a) option, automatically (c) is not possible. (d) is not possible because if i have say, 4>3, then (1/4)<(1/3)

[Granpa Simpson]

Q16) The overall Savings investment gap initially is 700 crores now as G increases to 850 crores there is a decrease in total savings making the gap -150 crores, this is due to decrease in total savings Now again there is an increase in import demand which is 600 crores...to be in equilibrium this gap in savings and investment has to be nullified by an extra 150 crore of investment which is nullified by an increase in imports by 600 crores and there is an excess of 450 crore which will be nullified by an equal amount of increase in exports i.e 450 units...

[Ashima]

hOW ABOUT 17? Should be a I guess!

[Granpa Simpson]

It will be "a' i guess..not sure though..:)

[Dreyfus]

For 16...I=pvt savings +public savings+current account deficit
Using this I m getting ΔX=450cr
For q18...LM relation is given by money supply = aY-br , since LM is horizontal that implies interest rate is insensitive of Y
Therefore when G↑→Y*↑→Money demand at given interest rate,r*, will increase due to increase in income...

[ViV]

Sorry, I should have also written my workings too when I did upload the questions...
Here are My answers..
A2   (b)
A16 (a)
           C + I + G + X - M = C + S + T
                G - T + X - M = S - I
                 850  + X-600 = 700
                                X = 450
A17 (a)
A18 (a)

Thank you Guyz!!!

[ViV]

Anyone on A19 (3rd Link) ????

[vandita24x7]

A19 ans d

On Thu, Apr 17, 2014 at 7:38 PM, ViV [via Discussion forum] <[hidden email]> wrote:

Anyone on A19 (3rd Link) ????

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NAML

[ViV]

How did you get this?

[Shefali]

Pls explain the 3rd one..

[vandita24x7]

Say Price of A = 1. then acc to the questn, Price of B = 2.5. Now given labour conditions(100 units in total) either the economy could go for producing 200 units of A  OR 100 units of B Or Both..... now, the economy's aim is to maximise benefit from trade, so, producing 100 units of B earns the economy 2.5x100=250 currency units. and producing 200 units of A earns the economy 200x1=200 currency units. So there is clear gain of 50 currency units in producing B. Check for all other options, total gain is lesser than this in all others. 

On Fri, Apr 18, 2014 at 5:50 PM, Shefali [via Discussion forum] <[hidden email]> wrote:

Pls explain the 3rd one..

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NAML

[ViV]

Hey! Vandita price of B is 2.5 units of A not 2.5 of price A

[vandita24x7]

Orre baba... viv u r overthinking dear.. this means that 2.5 units(in any currency) times A. This is the answer...confirmed from professors..

vandita

On 18 Apr 2014 21:29, "ViV [via Discussion forum]" <[hidden email]> wrote:

Hey! Vandita price of B is 2.5 units of A not 2.5 of price A

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NAML

[ViV]

Ok.. thanks