jnu 2011

[ritu]

in question number 16 of jnu 11 discussed here.....what are they asking for????????nominal or real output???????why havent they mentioned it clearly.....and how can we use the price relation :P=m*(wl)/y
when its already given that its appliocable only when output is at full employment level???????????????and in 1st question they have mentioned that find full empt output level?

[AJ]

@ aastha, ritu, tim

Can u explain answer to this question.... I am getting 1. yes!   :(


Suppose the consumer's attitude towards risk is as follows :
He prefers an alternative which promises him an amount of Rs X with prob p and an amount of Rs Y(X>Y) with prob 1-p to an alternative which promises him an amt of Rs Z for sure if and only if Z<Y+(2p/3)(X-Y). An insurance co approaches in his youth and offers to pay Rs 7615 per month to the consumer in his middle age in exchange for his flow of income during that period. Will the consumer accept this offer ?
1. Yes
2. No
3. The consumer will be indifferent between accepting and declining the offer
4. The consumer's acceptance is a random event.

[anon_econ]

hey guys,
for q26 i think he will accept the offer coz 7615>5000+0.5*5000
in q27 i'm getting option b. basically i equated 2500-s to 0.25*(2500+s/2)+0.75*(5000+s/2).
what do u guys think??
and ritu full employment output must be real output..full employment output means output when there is full employment na..that is a unique output level which can be produced at many different price levels.

[aditi5000]

hi Seema
in question 17, you wrote
PY=1000+0.2W+I
=> PY= 4000+(1/0.25) I
I tried the same thing but I got :
PY = C+I
PY = 1000 + .8W +.6PY - .6W + I
.4 PY = 1000 + .2W +I
        =1000 + .2 (10*1500) +I
        =4000 + I
        = 4000/0.4 +I/0.4
PY = 10000 + I(2.5)

which means multiplier is 2.5 - obviously a wrong answer but where am I going wrong? I followed your procedure completely... Please help. Thank you in advance.

[aditi5000]

Hi Aastha,

I am getting the following answers for 24 - 25. 26-27 I'm still figuring out. Please let me know whether this makes sense to you ...

24 - exp value = .25*5000*12*20 + .75*12*10000*20 = 21 lacs (so none of the above..)
25 - PV = FV/(1+interest rate)^no of years
Now total lifetime income = 21 lacs + 2500*12*20 = 27 lacs (this is the answer because i = 0 and 1^anything = 1 )

[aditi5000]

I got my mistake, thanks.

[AJ]

@aditi.. what mistake r u making there... cuz m doing the same thing and getting multiplier as 2.5 ..

and@ vasudha.. yup, me too getting 'yes' for 26..

and pls explain how u did 27th.. I dint understood y u took s/2 on right sides....

[anon_econ]

AJ, i thought that if i save 's' in my youth and i want equal consumption in both the remaining periods, i would consume s/2 in each of them

[aditi5000]

PY = C+I
PY = 1000 + .8W + .6 (PY - 10L) + I
put L from that Y and a relation
then it becomes 1000 + y/8 + I ON THE RHS
you know that P=5/6
You'll get the answer as 4

[AJ]

@ vasudha

I too am getting (b)

and I solved:

2500+x = 8750-x-y = y

8750 is expected income of period 2
x is amount he borrows from period 2 ..for period 1
y is amount he saves in period 2..for last period

so I am getting .. x as 1250..
and y as 3750


and consumption in all periods as 3750

I don't know if we r doing same thing or not..!!

[AJ]

@ aditi.. thnks..

[anon_econ]

ya AJ it's the same :)

[Chocolate Frog]

Vasudha, where did you get these figures (5000 and 0.5) from? The question, as posted by Tim and re-posted by AJ does not mention these values.

[anon_econ]

2p/3 is 0.5 coz p is 3/4. 5000 is Y and 10000 is X.

[aastha]

@ aditi

yes i am also getting the same ans for 24 and 25 ....

@ vasudha

in q 26 even i am getting yes only as i overlooked that X>Y .. thanks >> and could u pls explain q 27 once again !!!

thanks in advance

[ritu]

hello
for question 27 i also got option b but with a diff approach...
since the person wants to minimise diff btwn expected cons in age 2,3 and constant consumption in age 1.....i thought that minimum difference can be 0....that is he wud like to have the same consumption per month all thru his life......so  his lifetime expected income is 27,00,000.....divide it by 60 u get yearly income...divide it by 12 u get monthly income which comes out to be 3750....but in age 1 his income is 2500 per month....so his savings are =2500-3750
=  -1250


i dont know if this method correct...but this is what i thought...!!!!!

[ritu]

i am in a big confusion here regarding question 16-22 of jnu 2011....
for q 16 we just need full empt level of income which shud be wat vasudha said y=a.l*=16.2000=32000
ok...now from here onwards if investment increases the only result will be a rise in p so that only py increases but y stays fixed at 32000....haina???
answers from 17-19 are perfectly alrite.....
problem begins with questn 20...
in 20 since investment is just 5000,the y is still below full employment and so price is fixed at 5/6....right?????
so answer for question 20 is option a =0%
now my problem is in q 21,
at I=4000,y= 24000 so p=5/6
at I=7000,y=32000(its full emplt time ) so py=30,000 ...this implies p=30,000/32000=15/16
so p has increased from 5/6 to 15/16 which is a 12.5% increase nd not in options????????
i have done this question now atleast 10 times nd i dnt get it where i m wrong!!!!!!!!!
SO PLS HELP ND TELL ME MY FAULT.....:(((((((((((((

[anon_econ]

ritu, ur approach in q27 is fine :)
and in 16-22 P is mw/a. it wont change when investment changes!! when i say that full employment level of output is a unique number i dont mean that output is always at that level! i meant that it's the level of output when L is at the full employment level!
see, Y will always equal AD in equilibrium. further u r given how y is related to L so u can calculate one of them if u r given the other. price level is determined independently in this model so it duznt change if AD changes.

[anon_econ]

Ritu, what i wrote above is wrong..i was ignoring the fact that at I=7000, Y reaches full employment so P is no longer mw/a. But tell me how r u getting Y=32000 when I=7000? I'm unable to get Y when I is 7000 coz i'm getting Y only if I put some value of P in PY=C+I and here i can't put P=mw/a coz if Y is at full employment then P is not determined by that relation. Seema said in the first post that PY comes out to be 32000 and so P=1..i dont get this either :(

[ritu]

hi vasudha....i got 32000 by that relation only that y/l=a so this means when l=l* y=16.2000=32000
which shud be the answer to question 1....
now when investment =7000
i have PY=C+I
now since at I=7000,we have already reached full employment....you have given values of y=32000,I=7000,W=10.2000=20,000,R is also expressible solely in terms of py...
now initially put all values except value of y and u get final expression      PY=30,000
in this Y=32000 so we get P=15/16 when I=7000.....
that is why i said that as I rises from 4000 to 7000 P rises from 5/6(below full emp ) to 15/16(above full emp t) ....which is a 12.5%rise but not one of the options.....:(((((((
now pls tell kya galat kar dia aisa karke maine...!!!!