Assume the central bank pursues contractionary monetary policy. What is the first round effect on the value of the domestic currency, if there is high mobility in the international capital markets?

Real interest rates are the

A) interest rates quoted in the market. B) interest rates quoted in the market plus the expected inflation rate. C) nominal interest rates plus the inflation rate. D) interest rates quoted in the market minus the inflation rate.

The_____________is the principle that suppliers will normally offer more for sale at higher prices than lower prices.

Fill in the blank(s) with the appropriate word(s).