Steady state growth in the solow model


Answer all the questions. Section A to be answered in about 500 words each and Section B to be answered in about 300 words each.

Section A:

Question 1: Describe the concept of steady state growth in the Solow model with suitable diagram. Show that the golden rule of Phelps is not a steady state.

Question 2: Differentiate between adaptive expectations and rational expectations. Describe why the shape of the Phillips curve changes when we introduce expectations in our analysis.

Section B:

Question 3: Policy rules are better than discretionary policies. Validate the statement above in light of new classical macroeconomics.

Question 4: Describe in short the salient features or characteristics of political business cycle theory.

Question 5: Bring out the factors which lead to the rigidity in salaries and prices.

Question 6: Describe with suitable diagrams why an economy with fixed exchange rate can’t follow an independent monetary policy.

Question 7: Write brief notes on the given below:

a)  Inter-temporal utility maximization. 
b)  Real business cycle theory. 

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Macroeconomics: Steady state growth in the solow model
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