Using Figure 1 above, if the aggregate demand curve shifts from AD1 to AD2 the result in the long run would be:

When using rational expectations, forecast errors will, on average, be ________ and ________ be predicted ahead of time

A) positive; can B) positive; cannot C) negative; can D) zero; cannot

________ in the domestic interest rate causes the demand for domestic assets to decrease and the domestic currency to ________, everything else held constant

A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate