JNU ECOM 2011 QUES 23-32

[Arushi :))]

Sorry guys :P was on a trip to South :D Missed forum though :D
QUES 23
Suppose in a closed economy with no government expenditure and taxation,
the investment function is given by I= 2000+ 0.1Y-8000r, and the saving function is given by:
S= 1000+ 0.2Y+2000r, where Y denotes the aggregate income and r the nominal rate of interest. The economy is subject to liquidity trap at r =0.01 . What is the maximum equilibrium value of Y possible in this economy?
a) 7800
b) 9000
c) 11000
d) None of the above
Answer-b
Questions 24-27 are to be answered on the basis of the following  information:
Suppose there is a consumer whose life is divisible into three periods which follow each other consecutively-youth, middle age & post-retirement age.
The length of each period is 20 years and the consumer earns no labour income on post retirement. In his youth the consumer earns labour income at the rate of Rs 2,500 per month. In his middle age the consumer's earnings are uncertain- there is a 25% probability that he will earn at tht rate of Rs 5,000 per month, alternatively he will earn at the rate of Rs 10,000 per month.
The consumer gets to know what his rate of earnings in middle age will be at the end of his youth.
Assume that consumer expects to pay no taxes, the nominal rate of return on saving and the rate of interest is always zero and there is no inflation expected throughout his life.
QUES 24
What is the expected value of the consumer's earnings (Rs in lakhs) in middle age?
a) 18
b) 20
c) 30
d) None of the above
Answer-d
QUES 25
What is the present discounted value of the consumer's expected lifetime labour income (Rs in lakhs)?
a) 24
b) 26
c) 27
d) 36
Answer-c
QUES 26

Answer-a
QUES 27

Answer-
QUES 28

Answer-a
QUES 29

Answer-a
QUES 30
Bread & apple are substitute goods. A sudden rise in the supply of flour for making bread will result in:
a) fall in the price of bread ; and rise in the price of apple
b) fall in the price of bread ; and fall in the price of apple
c) fall in the price of bread ; and no change in the price of apple
d) None of the above
Answer-b
QUES 31
The utility function of a consumer is given by u= 3(x1+x2), where u, x1, x2 denote utility, amount of good 1 and amount of good 2 respectively.
Unit prices of good 1 and good 2 are Re 1 and Rs 3 respectively.
Consumer's income is Rs 300. The consumer attains equilibrium at
a) x1= 150, x2= 50
b) x1= 50 , x2= 150
c) x1= 0, x2= 100
d) x1=300 , x2 = 0
Answer-d
QUES 32
The production function of a firm is given by Q = (X)^(1/3)(Y) , where Q, X and Y denote quantities of output, input 1 and input respectively. The production function exhibits:
a) constant returns to scale
b) increasing returns to scale
c) decreasing returns to scale
d) None of the above
Answer-b

[Arushi :))]

How to proceed with question 27?

[kangkan]

it is reasonable to assume that he borrows in his youth and pays off from middle age..also that youth consumption is <= to middle age consumption...now lets assume that he consumes c per year in mid and retirement age. let him consume 30000+k in his youth.

Therefore total debt at the end of youth is 20k

Since he must pay off before he dies 105,000*20=20k+40c
or k+2c=105,000

Hence our problem is Min C-(k+30000) subject to k+2c=105000 .it is a linear prgramming problem..you can solve it by a trick too..since it is reasonable to expect that c is greater than youth consumption. the smallest value of c-(30000+k) is zero.Now put k=105000-2c in dar and solve..we get c=45000 and K=15000..this means he borows 15000 per year or 1250 per month..hence option b

[kangkan]

by the way did u get any notification if they have recieved the confirmation page at jnu?

[The Villain]

@Arushi quest 24 ...is the ans 21???
 
And wt about 26...pls help me with it

[econ14]

hey arushi for q.30 will it be option (c)?
and plz some one explain q 26.

[L14]

for qn 4 yes i got 21. for qn 30 its b only, as they are substitutes if apples' price doesn't go down it will not get sold.
26.. kangkan pls help

[Arushi :))]

For 26th:
We have to make comparison between two alternatives here.
We can consider the first alternative as the case of middle age where the person gets
X = 10,000 with p= 0.75 & Y = 5000 with (1-p)= 0.25 , also X>Y
Now we can consider the second alternative as someone offering him Amount 7,650 per month . Let Z=7,650.
We want to check if he accepts the offers or not.
He will decline the offer iff Z< Y+(2p/3)(X-Y)
But on calculating Z= 7,650
And the term on R.H.S gives 5000+ (2*0.75/3)(5000)= 7,500
This term is less than 7,650
Its given that he will choose first alternative if Z< Y+(2p/3)(X-Y)
But 7650> 7500 . So, he will accept the offer . Hence answer is a .

[Arushi :))]

For 30th:
What I did is since supply of flour increases , therefore price of bread decreases . Now the demand curve for apples will shift to left at each price level and the new equilibrium price level for price will be lower than what it was  before. Therefore price of both of them decreases.

[Arushi :))]

@ kangkan- thanks :) & no notification as of now :/

[econ14]

thanx arushi :)

[Arushi :))]

Yup, for 24th its 21 lakhs.

[Ridhika]

guys how are u solving 28? It seems pretty straught forward.. but i keep getting k= 0.35 :s .. please help!

[Arushi :))]

In 2001,
ratio of sales of scientific to engineering books = R = x/y
In 2002,
sales of scientific books increased by 40% ; x' = x+0.40x
sales of engineering books decreased by 50%; y'= y-0.50y
=> r = 1.40x/0.50y
r/R = 1.40/0.50 = 2.8

[Ridhika]

Oho.. I'm so silly.. I've been dividing 0.5/1.4 .. thanks :)

----- Reply message -----
From: "Arushi :) [via Discussion forum]" <ml-node+[hidden email]>
To: "Ridhika" <[hidden email]>
Subject: JNU ECOM 2011 QUES 23-32
Date: Wed, Mar 26, 2014 7:33 PM

In 2001,
ratio of sales of scientific to engineering books = R = x/y
In 2002,
sales of scientific books increased by 40% ; x' = x+0.40x
sales of engineering books decreased by 50%; y'= y-0.50y
=> r = 1.41x/0.50y
r/R = 1.41/0.50 = 2.82

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