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.
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.
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.