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D ARTMOUTH  C OLLEGE D EPARTMENT   OF  E CONOMICS E CONOMICS  22 P ROFESSOR  A VNER  B AR -I LAN M ACROECONOMICS S UMMER  2004 S ECOND  M IDTERM  E XAMINATION     August 13, 2004 Instructions: 1. Please write your name on the following blank. Name:                                                                                2. The first part of the exam consists of 11 multiple choice questions worth 5 points each.  Circle the best answer to each question. There is no penalty for guessing. 3. The second part consists of 3 problems worth 45 points. Write all answers on the exam  in the  space provided 4. The exam will last 60 minutes. Allocate your time appropriately. ! ! ! GOOD LUCK ! ! ! 1
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PART 1 -  MULTIPLE CHOICE QUESTIONS 1. A painting is currently worth $100,000, and is expected to maintain its real value for  three years. The real interest rate is 10%. What is the present value of the painting’s  expected price at the end of the third year? a. $75,131 b. $88,899 c. $96,153 d. $100,000 e. $70,000 2. The “life cycle” and “permanent income” theories of consumption share which of the  following features? 3. According to the accelerator model, as the economy enters a recession and GDP declines,  we should expect that the level of net investment
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