When Nominal Interest Rates Are Are Zero, the AD Curve

question 76

Multiple Choice

When nominal interest rates are are zero, the AD curve has a ________ slope because when aggregate output decreases the monetary authorities ________ lower the nominal interest rate. As inflation rises the real interest rate _______which will ________ investment and aggregate output.

• A) negative; can; increases; decrease
• B) negative; cannot; decrease; increase
• C) positive; cannot; increases; decrease
• D) positive; can; decreases; decrease

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