Answer all the given questions. Section A to be answered in around 500 words each and Section B to be answered in around 300 words.
Section A:
Question 1: What is meant by the term steady state in the Solow model? Describe how Golden Rule is distinct from steady state.
Question 2: Illustrate how the permanent income hypothesis reconciles the difference between short-run and long-run consumption behavior.
Section B:
Question 3: Policy makers must stick to rules rather than pursuing the discretionary polices. Do you agree with the above statement? Verify your answer.
Question 4: Describe in short the salient features of real business cycle theory. In what respects is it distinct from other theories of business cycle?
Question 5: Describe why firms might offer a higher wage to workers than the equilibrium wage rate.
Question 6: Bring out the significant issues on which Lucas criticizes the Keynesian macroeconomics. To what extent the New-Keynesian economists have accepted such criticisms?
Question 7: Write short notes on the given below:
a) Rational expectation and adaptive expectation.
b) Non-accelerating Inflation Rate of Unemployment.