Re: jnu 2011

Posted by Manvendra on Apr 26, 2012; 7:07pm
URL: http://discussion-forum.276.s1.nabble.com/jnu-2011-tp7503584p7503968.html

Hi Seema :)

I  am stuck on the same problem too .
I have given it a try and let me share my approach.

Q 1.

If I=4000, C=1000+.8W+.6R, w=10,m=4/3 , a=16 , L*=2000, what is full employment equilibrium ?

Given PY = C + I
So, PY = 1000 + 0.8W + 0.6 R + 4000

PY = 5000 + 0.8 W + 0.6 ( PY - W )  { Here I've taken the remaining income (R) to be equal to the Total Income (PY) - Wage Income (W)

Now, Wage Income (W) = wL ( wage per unit labor * total labor employed )
Since , Y/L = a ..we can write L = Y/a
Therefore , PY = 5000 + 0.8 ( wY/a) + 0.6 ( PY - wY/a)
 on rearrangement , we get
0.4 PY = 5000 + 0.2 wY / a

As the Price level is a fixed markup to the wage cost per unit output , we can rewrite the price ( P )
as equal to w/a

So, we get 0.4 wY/a = 5000 + 0.2 wY / a
0.2 wY/a = 5000
which gives us Y = 40,000.

But to produce 40,000 units of output we require 2500 hours of labor .
As the labor available is only 2000, the o/p produced is  32000 ( Y = aL )

So , the answer could be None of the above but I'm not sure.. :(