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ECONOMICS 204 PAGE NUMBER 1 UNIVERSITY OF VICTORIA ECONOMICS 204 MIDTERM 2 – Spring 2011 DURATION: 50 MINUTES INSTRUCTOR: J. Li NAME ________________________________ V STUDENT NUMBER: _________________ THIS QUESTION PAPER HAS 7 PAGES. PLEASE COUNT THE NUMBER OF PAGES IN THIS EXAMINATION PAPER BEFORE BEGINNING TO WRITE, AND REPORT ANY DISCREPANCY IMMEDIATELY TO THE INVIGILATOR. ANSWER ALL QUESTIONS BY WRITING ON THIS EXAMINATION PAPER. FOR 1 MARK BE SURE TO TUCK YOUR CRIB SHEET (WITH YOUR NAME IT) BETWEEN PAGES 1 AND 2 WHEN HANDING IN YOUR EXAM PAPER. Section 1 (20 marks) Answer ALL multiple-choice questions by circling (and ONLY circling) the letter corresponding to the best answer. 1. The rate of labour-augmenting technological progress ( g ) is the growth rate of: A) labour. B) the efficiency of labour. C) capital. D) output. 2. The natural rate of unemployment is: A) the average rate of unemployment around which the economy fluctuates. B) about 10 percent of the labour force in Canada. C) a rate that never changes. D) the transition of individuals between employment and unemployment. 3. In the Solow growth model, if investment is less than depreciation, the capital stock will ______ and output will ______ until the steady state is attained. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase
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ECONOMICS 204 PAGE NUMBER 2 4. A small open economy with perfect capital mobility is characterized by all of the following except that: A) its domestic interest rate always exceeds the world interest rate. B) it engages in international trade. C) its net capital outflows always equal the trade balance. D) its government does not impede international borrowing or lending. 5. Sectoral shifts: A) lead to wage rigidity. B) explain the payment of efficiency wages. C) depend on the level of the minimum wage. D) make frictional unemployment inevitable. 6.
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