jnu 2006

[Arushi :))]

Investments= 5000
Exports = 1,000
If the ratio of imports to national income is always 0.1
and the ratio of savings to national income is always 0.2, then:
a) calculate the national income of the economy.
b) calculate trade balance.
c) At this level of exports , investment and import  ratio, what should the national income be if the economy is to have balanced trade?
How to do c part?
Do we have to still take S/Y= 0.2
If that is so,
then for CA to be equal to zero, exports must equal imports.
Then , Y should be 10,000
But then, S would be 2000 which wont equal investment .

[The Villain]

@Arushi ...its written that the ratios are always equal..
so if we take as it is
m/y=0.1
m=.1y
equating exports and imports i'm getting same...i dont knw...confused

[bhavya jain]

@ Arushi & Ron, wat answers are u ppl getting for the above question..

[mrittik]

NI=0.8Y+I+1000-0.1Y=> Y=20,000. Import=0.1*20000=2000, TD=-1000.