Economics Answers

Q.1(a) Suppose investors prefer one-year bonds to two-year bonds and will

purchase a two-year bond only if they expect to receive an additional 2% over

the returns from holding one-year bonds. Currently, one-year bonds yield 6%,

but investors expect the yield to fall to 2% next year.

(i) Which of the three models of term structure is relevant in this case?

(ii) What is the yield on a two-year bond?

(iii) Is the yield curve flat, downward sloping or upward sloping? Explain.

(b) Write a short note on the NPA problem in the Indian Banking System?

20. Given the electricity shortages observed in Durban in 2019, the South African government wants

to reduce electricity consumption by 5%. The price elasticity for electricity is 0.4, therefore

government should

(4 Marks)

a) Increase the price of electricity by 12.5%

b) Decrease the price of electricity by 2%

c) Increase the price of electricity by 10%

d) Decrease the price of electricity by 6%

Suppose that citizens of South Africa are advised by health authorities on the health benefits of consuming fresh ginger.

demonstrate and explain using a clearly labelled diagram, the effects of this information on the equilibrium price and equilibrium quantity of fresh ginger

Consider a perfectly competitive industry where each firm has a long-run cost function:

C(q) = q³ – 20q² +120q

Long-run average costs are minimised at an output level of 10 units. The industry demand curve is given by:

Q = 1000 – 40p

where Q represents industry output and p represents the equilibrium price of industry output.

Required:

In the long-run equilibrium, this industry will sustain how many firms?

From the following information, furnished by Ms. Anucampa pertaining to the financial year ended as on 31st march 2021, Short term capital gains on sale of shares in an Indian company received in Japan 10000 Dividend from a Chinese company received in China 3000 Agricultural income from land in Madhya Pradesh 5000 Dividend from PJV Ltd an Indian Company 4745 Gross Rent from a residential property located at Singapore, later on remitted to the saving account in Bank of Maharashtra, Mumbai using the approved channels 600000 Compute the total income and give reason for considering/ not considering these specific items for the relevant assessment year 2021-22, if she is

a. Resident and ordinary resident

b. Non resident 

Ms. Madhu is a single mother, aged 35 years. As a single parent, she has the complete financial responsibility of her parents and a 8 year old son on her shoulders. Given the current Covid 19 situation, she is not sure about where to invest her money. Keeping her current status into mind:

a. Explain which insurance policy would you suggest her to take for her 8year old son and why? 

b. What are the other lucrative investment options you would suggest her for a better return? Discuss. 

Dr. Naina who is 27 yrs old has just completed her PhD and is newly employed with XYZ University. She has no knowledge about financial investments apart from traditional investments like FD/RD. So, she approaches her relationship manager in bank for financial advise. As her relationship manager, which financial products would you suggest her to invest into, considering her age and risk appetite. Also consider her tax liabilities so that she can avail the benefit of the investments.

Mr. Lalit has a total annual income of 16 lacs p.a. His salaried income is 11 lacs and remaining 5 lacs is agricultural income. It is time for him to file yearly tax return. Which tax slab does Mr. Lalit fall into? Accordingly, list all the possible deductions/allowances which Mr. Lalit can avail under different heads (with section).

Demonstrate graphically, the effect of the increase in the intercept of the demand function in (b) above on the equilibrium quantity and price. What generalization can you come up with from the resulting graphical analysis? 

Given the out put Q= 2LogL + 4Logk, PL =$4, PK =$12.

Price of the goods is given Po.

A. Find the derive demand function for labour and capital.

B. Establish the supply function

C. Determine the expansion path expression for labour and capital