Marking

1
Marking Guide_ Exam _2021-2022

Applied Statistics_ Year II
Economic Development Theory
Date:
Instructions: The booklet will be submitted along with the question paper.
Section A
1.
Health Education Income Gini in Log
Life expectancy Mean Year Expected Year GNI
at birth Schooling Schooling
Current 67.5 4.3 10.7 4,250 3.628
Highest 84 15 17 74,000 4.869
Lowest 20 0.00000 0.0000 100 2
Actual−Min
Index = Max−Min
67.5−20 47.5
Life exp = = = 𝟎. 𝟕𝟒𝟐
84−20 64
4.3−0
Edu m = 15−0
= 0.286
10.7−0
Edu expected = 17−0
= 0.629
0.286+0.629
Edu index = 2
= 0.457
3.628−2 1.628
GNI index = 4.869−2 = 2.869 = 0.567
1/3 1/3
HDI = √0.742 ∗ 0.457 ∗ 0.567 = √0.192 = 0.576
2.
Items Quantity produced Price Total value output
Beans 12 2.5 30
Rice 25 3 75
Maize 5 11 55
Nominal GDP 160
Items Quantity produced Price Total value output
Beans 12 2 24
Rice 25 2 50
Maize 5 10 50
Real GDP 124
𝟏𝟔𝟎
𝑮𝑫𝑷 𝑫𝒆𝒇𝒍𝒂𝒕𝒐𝒓: = 𝟏. 𝟐𝟗
𝟏𝟐𝟒
3
Assuming a population of 10 people:
a) In lower income workers, you have: 10 𝑝𝑒𝑜𝑝𝑙𝑒 × 80% = 8 𝑝𝑒𝑜𝑝𝑙𝑒
b) In higher income workers, you have: 10 𝑝𝑒𝑜𝑝𝑙𝑒 × 20% = 2 𝑝𝑒𝑜𝑝𝑙𝑒
c) Cumulative earnings of lowers income workers: 25,000 × 8 = 200,000
d) Cumulative earnings of higher income works: 150,000 × 2 = 300,000
e) Total earnings: 200,000 + 300,000 = 500,000
200,000
f) Share of income bottom: (80% 𝑜𝑓 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛) : = 0.4 = 40%
500,000
2
300,000
g) Share of income top: (20 % 𝑜𝑓 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛): = 0.6 = 60%
500,000
h) Graph:
income
line of equality
0.4
Actual Lorenz
0.8 Population
Area under actual Lorenz curve:

1
1) (0.4)(0.8) = 0.16
2
1
2) (0.6)(0.2) = 0.06
2
3) (0.4)(0.2) = 0.08
Total area under actual Lorenz curve: 0.16 + 0.06 + 0.08 = 0.30
1
Area under line of equality: (1)(1) = 0.50
2
𝐴 (𝐴+𝐵)−𝐴 0.50−0.30
𝐺𝑖𝑛𝑖 𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡: = = = 0.40
𝐴+𝐵 𝐴+𝐵 0.50
4 ∆𝑘 = 𝑠𝑦 − (𝑛 + 𝛿)𝑘
At steady state: ∆𝑘 = 0 ⇒ 𝑠𝑦 = (𝑛 + 𝛿)𝑘
0.36 ∗ 2 ∗ 𝑘 0.5 = (0.02 + 0.04)𝑘

0.36∗2 𝑘
= 𝑘 0.5 ⇒ 12 = 𝑘1/2 ⇒ 𝑘 = 144 and 𝑦 = 2𝑘1/2 = 24
0.06
5.
Production (value added) method
Famer 1,000
Miller 2,000
Baker 2,000
Total 5,000
Section B
1. 𝑌 = 𝐶 + 𝐼0 + 𝐺 ; 𝐶 = 𝐶0 + 𝑏𝑌𝑑 ; 𝑌𝑑 = 𝑌 − 𝑇; 𝑇 = 𝑇0
𝑌 = 𝐶0 + 𝑏𝑌𝑑 + 𝑇 + 𝐺
𝑌 = 𝐶0 + 𝑏 (𝑌 − 𝑇) + 𝐼0 + 𝐺
𝑌 = 𝐶0 + 𝑏 𝑌 − 𝑏 𝑇 + 𝐼0 + 𝐺
(1 − 𝑏)𝑌 = 𝐶0 − 𝑏𝑇 + 𝐼0 + 𝐺
3
𝐶0 −𝑏𝑇+𝐼0 +𝐺
𝑌= 1−𝑏
𝐶0 −𝑏𝑇+𝐼0 +𝐺
𝑌= 1−𝑏
∆𝑦 1
𝑀𝐺 = ∆𝐺 = 1−𝑏
2. No
3. c. very low or zero
4. c. people are working full-time and hard, yet have a low marginal product
5. c. simultaneous development of all sectors of the economy d. all of the above.
6. a. Balanced growth strategy
7. d. Creation of a large public sector
8. c. savings by households
9. b. which is self-sufficient
10. b. Decrease in capital-output ratio
MARKING SCHEME of additional questions
SECTION A:
6(a)We are asked to derive the IS and LM relations.
**The IS relation is found using the identity:

Y=C+I+G
Y = 200 + 0.25YD + 150 + 0.25Y – 1000i + 250
Y = 200 + 0.25(Y – T) +150 + 0.25Y – 1000i + 250
Y = 200 + 0.25Y – 0.25T + 150 + 0.25Y – 1000i + 250
Y = 200 + 0.25Y – 0.25(200) + 150 + 0.25Y – 1000i + 250
Y = 200 + 0.25Y – 50 + 150 + 0.25Y – 1000i + 250
Y = 0.5Y + 550 – 1000i
0.5Y = 550 – 1000i
Y = 1100 – 2000i : Which is the IS relation.
**The LM relation is found by first equating Money Supply with Money Demand:
(M / P)s= (M / P)d
1600 = 2Y – 8000i
1600 – 2Y = -8000i
8000i = 2Y – 1600
i = Y/4000 – 1600/8000
i = Y/4000 – 0.2 : Which is the LM relation.
(b) We are asked to use the IS and LM relations from (a) to solve for the equilibrium levels of output
(Y) and interest rate (i). We solve the system of two equations with two unknowns (Y and i):
IS: Y = 1100 – 2000i
LM: i = Y/4000 – 0.2
4
We first sub the expression for i from the LM relation into the IS relation:
Y = 1100 – 2000(Y/4000 – 0.2)
Y = 1100 – 0.5Y + 400
Y = 1500 – 0.5Y
1.5Y = 1500
Y = 1000
We now sub this value for Y into the LM relation to find the corresponding value for i:
i = Y/4000 – 0.2
i = 1000/4000 – 0.2
i = 0.25 – 0.2
i = 0.05
i = 5%
7. In Indonesia during the 1970 the capital-output ratio averaged to 2.50.
a) Using the Harrod-Domar growth equation, what saving rate would have been required for
Indonesia to achieve an aggregate growth rate of 8% per annum?
Let g= Rate of growth of GDP

s= Savings ratio
c= capital output ratio
𝒔 𝒔
As ,Rate of growth of GDP = Savings ratio / capital output ratio or g = where 2.5 =
𝒄 𝟎.𝟎𝟖
or s=2.5*0.08= 0.2 or 20%
b)With the same capital-ouput ratio, what growth target could be achieved with a saving
rate of 27 percent?
(2marks)
𝒔 𝟎.𝟐𝟕
g=𝒄= =0.108=10.8%
𝟐.𝟓
SECTION B:
11.d 12.b 13.a 14.d 15.c 16.d 17.d 18.b 19.d 20.a 21.c 22.d 23.c
Section A
8. Number of Population who are below the poverty line
100 * 2 =200
200* 4 =800
-----------------
Tot=1000
Population Above poverty line
400 * 3 =1200
5
300*6= 1800
--------------
Total=3000
Total population=1000+3000=4000
HCR=POPULATION BELOW POVERTY LINE*100/TOTAL POPULATION
=1000*100/4000
=25%
comment: Twenty five percent of total population leaves below poverty line
Section B
24. (d) 25. (b) 26. (c) 27. (d) 28. (a) 29. (a) 30. (f)

Marking

Uploaded by

Copyright:

Available Formats

Marking

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Marking

Uploaded by

Copyright:

Available Formats

1

Marking Guide_ Exam _2021-2022

Area under actual Lorenz curve:

0.36 ∗ 2 ∗ 𝑘 0.5 = (0.02 + 0.04)𝑘

MARKING SCHEME of additional questions

6(a)We are asked to derive the IS and LM relations.

**The IS relation is found using the identity:

Let g= Rate of growth of GDP

Population Above poverty line

HCR=POPULATION BELOW POVERTY LINE*100/TOTAL POPULATION

You might also like