A decrease in taxes (when Ricardian equivalence does not hold) causes the real interest rate to ________ and the price level to ________ in general equilibrium.

The opportunity cost of capital is:

a. the cost of labor inputs required to operate that capital. b. the cost of raw materials necessary to put that capital to work. c. the payment necessary to keep that capital from moving to an alternative use. d. the costs of maintenance necessary to keep that capital operating. e. the cost of hiring more units of capital to generate additional units of output.

Economists observed the following growth rates in the fourth quarter of 1995: real GDP = 2.8 percent; M1 = 7.8 percent; GDP Deflator = 2.2 percent. Given this data, the growth of velocity was approximately

a. ?7.8 percent. b. ?5.0 percent. c. ?2.8 percent. d. ?2.2 percent. e. ?2.0 percent.