isi 2012 ME II

[anon_econ]

@ duck
i'm still not convinced about the 1st method for the same reason that i explained earlier..lol
but i've got the 2nd method..it's working for d 2 goods, 2 commodities case..i dint think of it earlier..thanks :)

@ ritu:
i think x<=y coz if x>y then for some e, x will be > than y+e

(6PY/1000)-(PY/1000)=5..so PY=1000. i'm jst using the definitions of the income velocity n transactions velocity

i guess 100-50-10

[ritu]

vasudha
can u pls elaborate on the concept of income nd transaction velocity of money and their formulas......coz i am only aware  of this equation MV=PY where v is velocity of money..

[anon_econ]

See this:
http://www.preservearticles.com/2011092313976/two-kinds-of-velocity-of-money-may-be-distinguished-transactions-velocity-and-income-velocity.html

[lovekesh]

Vasudha
In part a , land is fully used, which means marginal returns should be positive and must be compensating the rent per unit of land they might be paying to the landlord. So, when it becomes free, they would still utilize the whole land for production. So the profit maximizing level of labor determines the output of food and mfg.

[anon_econ]

Hey Lovekesh,
Thanks for ur reply. But i don't understand how we will find the profit maximizing levels of employment in either case w/o any info on input prices..plz explain!!

[lovekesh]

Vasudha
Even i have got the same thought as you have regarding this question. Can it be the case that land was fully utilized means it's the case of short run and when land is free, they are free to use it as per will and we wld have to solve it according to long run. will try to solve it that way. Would let you know if i reached the solution.

[lovekesh]

Ritu
Vasudha is right. you cannot add saving from last year as goods were consumed in that year only in terms of investment only. Loan is used to increase the one time income only as after that, it's just adding and deleting the same thing. When you work out this way, there will be equilibrium in all the years. Check for yourself. you were doing it right. Just stop adding saving from previous year.

[anon_econ]

I just hate these 2 questions :-x
In the second one how about this:
period 1: c=50, i=150, y=200, s=150.
period 2: c=100, i=50, y=150-100(repayment)=50, s=-50 which is not = i.
period 3: c=25, i=50, y=75, s=50??

[lovekesh]

In second case, take repayment as negative investment. Since my consumption is based on last year income, C=100, I=50, Negative investment = -100
Y= 100+(50-100)
Y=50
S= -50 = I
year 2
Y=75
So, that means i am worse off and should continue taking loan coz now citizens have become greedy and they have consumed more on the belief that this growth in income will be sustained. But in year 2, they will learn otherwise.

[lovekesh]

But i have one doubt. How can i take loan money into investment as my saving.

[anon_econ]

Y r u subtracting the amount repaid from investment?

[lovekesh]

To repay it's loan, country can't consume less as it's based on last year income. So, probably they will have to sell their capital they invested in last year. So, there will be net decrease in their physical stock of capital, thus negative investment.

[Pawan]

Hi Ritu and Vasudha..

Suppose loan is taken on for the period 1, and it has to be repaid in period 2. How are you guys going to treat repayment of loans in the second period?

[Pawan]

I am sorry. Did not see the discussions that followed in page 2 of the message thread

[Pawan]

I am sorry. Did not see the discussions that followed in page 2 of the message thread

[ritu]

hi guys in this domestic foreign vala question....
s0=50....they are used to finance investment in period 1 so I1=50.
s1=150...out of this 100 is used in beginning of next year to repay the loan and rest 50 as usual used to finance investment worth 50.....
so this is my final answer based on above reasoning....
c1=50   INV 1=150    S1= 150    Y1=200
c2=100  INV 2 = 50    S2=50      Y2=150


disinvestment doesnt seem convincing coz if they sell present machines to pay off loan how do they produce in future???????pls comment how do u find this answer.....
thanx

[AJ]

Hi..
How about this....

In year 1:
C=0.5(100)= 50
I= 150

Y= C+I= 200

(Income has 2 uses saving and consumption... but here three uses.. we consume a part of it, we repay the loan, we save the rest..)
So, S=50
(Ya, here domestic saving is not equal to total investment, cuz a part of I was borrowing from other country)

In year 2:
C=0.5(200)=100
I=50 (no borrowing this year)

So, Y= 100+50 = 150
And S= 50

S=I
so equilibrium!

@lovekesh.. I am not taking loan money into investment as saving....
@ vasudha.... I am not substracting amount repaid from investment...

So, This should be right!
PLEASE SAY YES!

[AJ]

@ ritu... U repaid the loans from savings... that's not possible I guess....

[neha 1]

pls explain ques 5

[Dheeraj]

ans 5:

Draw the budget lines of both A and B. Both would have kinks on their respective endowments. After drawing the budget lines, check the preference by the theory of revealed preference.