When Nominal Interest Rates Are Above Zero, the MP Curve

question 6

Multiple Choice

When nominal interest rates are above zero, the MP curve has a ________ slope because when the inflation rate increases the monetary authorities will ________ the real interest rate.

• A) negative; raise
• B) negative; lower
• C) positive; raise
• D) positive; lower

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Definitions:

Total Product

The aggregate quantity of output produced by an economic unit from a given set of inputs during a specific period of time.

Variable Cost

Costs that change in direct proportion to changes in a firm’s level of production.

Labor

Labor refers to the human effort, both physical and mental, used in the production of goods and services.