mt1-f2007 - Midterm#1 Econ 100B 100 points 75 minutes Fall...

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Midterm #1 Fall 2007 Econ 100B 100 points, 75 minutes Question 1 (10 points total; 7.5 minutes total) a. (6 points) You washed your own car. Your neighbor took her car to the car wash. Both of you have clean cars. Where is your activity recorded in GDP? Explain. b. (4 points) What is the current value of the federal government’s budget deficit? Question 2 (16 points total; 12 minutes total) a. (8 points) Describe the current sub-prime mortgage crisis by answering the following questions. What does it mean for a mortgage to be “sub-prime”? Why are so many homeowners currently facing foreclosure? b. (8 points) The San Francisco Supervisors are considering one strategy for addressing the crisis: urging sub-prime lenders to negotiate more affordable terms for borrowers facing foreclosure. Critics say, “This strategy won’t work.” Drawing on our discussions of sub-prime lending, identify an assumption that could explain why the supervisors and the critics disagree. Explain why this is a key assumption in the supervisors’ and the critics’ arguments. Question 3
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mt1-f2007 - Midterm#1 Econ 100B 100 points 75 minutes Fall...

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