Suppose that, initially, the nominal interest rate is 6 percent ...

[ETearle]

Suppose that, initially, the nominal interest rate is 6 percent and the inflation rate is 3 percent. If the inflation rate increases to 6 percent, what will be the new nominal interest rate?
 
  A) 6 percent
  B) 1 percent
  C) 11 percent
  D) 9 percent

Question 2

As labor increases, there is a
 
  A) shift of the aggregate production function, but no movement along it.
  B) movement along the aggregate production function, but no shift in it.
  C) movement along the aggregate production function and real GDP will increase less with each additional increase in labor.
  D) movement along the aggregate production function and real GDP will decrease less with each additional increase in labor.

[Awesome]

Answer to Question 1

D

Answer to Question 2

C

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