Answer all the given problems. Section A to be answered in around 500 words each and Section B to be answered in around 300 words.

Section A:

problem 1: What is meant by the term steady state in the Solow model? Describe how Golden Rule is distinct from steady state.

problem 2: Illustrate how the permanent income hypothesis reconciles the difference between short-run and long-run consumption behavior.

Section B:

problem 3: Policy makers must stick to rules rather than pursuing the discretionary polices. Do you agree with the above statement? Verify your answer.

problem 4: Describe in short the salient features of real business cycle theory. In what respects is it distinct from other theories of business cycle?

problem 5: Describe why firms might offer a higher wage to workers than the equilibrium wage rate.

problem 6: Bring out the significant issues on which Lucas criticizes the Keynesian macroeconomics. To what extent the New-Keynesian economists have accepted such criticisms?

problem 7: prepare short notes on the given below:

a) Rational expectation and adaptive expectation.

b) Non-accelerating Inflation Rate of Unemployment.