ECON 320 Midterm: ECON 320 Midtterm_Fall_2012.PDF
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10:00 (cid:150) 11:20 am, thursday october 25, 2012. Section a (50 percent): choose four (4) of the following statements and indicate whether they are true, false or uncertain. Brie(cid:135)y, but carefully, explain your answer using diagrams, logical arguments and/or evidence where appropriate. The volatilities of, persistence of and co-movements between the cyclical components of real macroeconomic aggregates in canada are similar to those of the united states, but very di erent from those of european countries. E ciency wage theory demonstrates how involuntary unemployment can arise in equilibrium, even in the long run. Suppose a (cid:133)rms faces quadratic capital adjustment costs given by. Kt; where a is a positive constant and (cid:1)kt denotes the change in the capital stock, kt. There is a linear relationship between a (cid:133)rm(cid:146)s optimal investment rate, it=kt, and tobin(cid:146)s q. An increase in the tax rate on a (cid:133)rm(cid:146)s pro(cid:133)ts will lead to a reduction in its optimal investment rate.
