Which of the following leads to a decrease in real GDP?
A) an increase in interest rates
B) an increase in government spending
C) an increase in the inflation rate in other countries, relative to the inflation in the United States
D) Households have increasingly optimistic expectations about future income.
Question 2
You lend 5,000 to a friend for one year at a nominal interest rate of 10. The CPI over that year rises from 180 to 190. What is the real rate of interest you will earn?
A) 0 B) 4.4 C) 5.5 D) 5.8
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