Please explain your answers for 2-5. Thank you!
1) Theory of linkages is most appropriate for which developmental model-
a) Balanced growth model
b) Unbalanced growth model
c) Population growth model
d) One-sector growth model
2) In a closed economy, if private savings exceed investment by 200, the budget of government is at -
(a) deficit of 200
(b) surplus of 200
(c) balanced budget
(d) none of above
3) Assume X has a closed economy. There are two classes - workers and capitalists. workers continue to consume their entire wages but capitalists save a portion (Sp) of their profits (P) and investment (I).
W = 500
Sp = 0.5p
I = 500
Government has option of financing an expenditure either by taxes on wages or profits. The increase in income as a result of would either be
(a) same
(b) 200 more in case it is financed by taxing profits
(c) zero
(d) not clear
4) In a closed economy where Central bank fixes interest rate, a rise in Government expenditure on social services would lead to
a) An increase in GDP with partial crowding out
b) No increase in GDP
c) An increase in interest rates
d) An increase in GDP with no crowding out
5) In the economy of X, the value of high-powered money is 200 units and the money multiplier is 5. Money demand is given by M = 1200-5i. What is equilibrium interest rate?
a) 2.5 b) 4 c) 4.5 d) 6
I got 4
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