In the long run, there is a tradeoff between inflation and unemployment

Assume the firms in a perfectly competitive industry are initially in long-run equilibrium and the cost of labor increases. In the short run, this will cause firms in the industry to:

A) reduce output and incur a loss. B) reduce output and earn a positive economic profit. C) increase output and incur a loss. D) increase output and earn a positive economic profit.

If you borrow money at a 9% nominal rate and the inflation rate is 2%, what is the real interest rate on the loan?

a. 9.0% b. 11.0% c. 7.0% d. 2.0% e. 4.5%