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Midterm+2+v1 - Ver sion 1 Midterm Exam 2 Econ 102 This exam...

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Version 1 Midterm Exam 2, Econ 102 March 15, 2010 This exam has two parts: a multiple choice section consisting of 20 questions, and a short answer/graphing section, also worth 20 points. You will submit all exam materials (scantron, question booklet and completed short answers) and sign yourself out at the end of the exam. 1. Given the following information about the economy of Lorch, what is the level of investment spending and private savings? rGDP=100 million , C=80 million, T=10 million, TR=5 million, G=15 million, X=10 million, IM=12 million a. I=3, S p =15 b. I=7, S p =19 c. I=7, S p =15 d. I=3, S p =19 2. The government of a country decides to run a higher budget deficit than before, and banks and savers realize that this increases the government’s risk of defaulting. What do you expect to happen to the equilibrium in the loanable funds market? 3. Mr. C. Pig is considering an investment in a business project. By his original estimates, the project’s revenue is $22, and his rate of return will be 10%. An economist tells him that the project will actually earn him $30. What is the highest interest rate that Mr. Pig will now be willing to pay up to what in order to carry out the investment?
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4. When Steve has $0 in income, he spends $500/month (from his savings account and from loans) on necessities such as food, rent, and utilities. When Steve wins $500 from the lottery, he spends $750 in total on these items. What is Steve’s Marginal Propensity to Consume? 5. Unplanned investment in the Bora Boran economy is $500. Which of the following pairs (given as (rGDP, AE p )) might conceivably describe Bora Bora’s economy in its present state ? a. (1400, 1400) b. (1500, 1000) c. (1000, 1500) d. (0, 500)
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