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Deardorff_w06-1 - Econ 102 Midterm 1 Answers February 9...

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Econ 102 Midterm 1 - Answers February 9, 2006 Part I: Multiple Choice: (26 Questions, 3 pts each=78 pts) Select the best answer among the given choices 1. Please indicate which of the following statements are true I. In general, stocks are riskier than bonds, so bonds must pay a higher return II. Government bonds are considered less risky than corporate bonds III. Stocks and bonds are attractive financial instruments that pay fixed returns. a) I only b) II only c) III only d) I and III only e) II and III only Use the following table to answer questions 2 and 3: Year Nominal GDP (in billions) GDP Deflator (base year 1997) 2000 10,453 121 2001 11,115 124 2002 11,990 125 2. Inflation between 2000 and 2001 was approximately (GDP Deflator 2001 – GDP Deflator 2000 )/GDP Deflator 2000 x 100 = 2.5% 1
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