On the graph above, which pair of points best represents a scenario in which the nominal interest rate and expected inflation decline equally?
A) I to H
B) G to K
C) I to J
D) K to F
E) J to H
Question 2
In a two-period model with production, a permanent increase in domestic government spending
A) increases domestic output and increases the current account surplus.
B) increases domestic output and decreases the current account surplus.
C) decreases domestic output and increases the current account surplus.
D) decreases domestic output and decreases the current account surplus.
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