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Midterm_2_-_Version_B_-_solutions

# Midterm_2_-_Version_B_-_solutions - Midterm 2 Principles of...

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Part I – Multiple Choice (40 points) 1. Recessions begin at _____ and end at _____. A. the highest unemployment rate; the lowest unemployment rate B. the lowest unemployment rate; the highest unemployment rate C. a peak; a trough D. the highest inflation rate; the lowest inflation rate. 2. If the natural rate of unemployment equals 5% and the actual rate of unemployment equals 6%, then cyclical unemployment equals: 3. Pat pays \$10,000 for a newly issued two-year government bond with a \$10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, Pat sells the bond. If the current one-year interest rate on government bonds is 5 percent, then the price Pat receives is:
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