If the nominal interest rate is 8.25% and inflation rate is 3%, the real interest rate is ________

M2 is

A) smaller than M1. B) larger than M1. C) equal to M1, given full employment. D) equal to M1, but only when all three functions of money apply.

Which of the following is a major problem with deflation?

A) Money loses value so rapidly that economic agents will be reluctant to hold money. B) Economic agents tend to put off purchases in anticipation of lower prices for goods and services, leading to a downward spiral in economic activity. C) Low prices for goods and services tend to result in massive shortages in most markets. D) Money supply cannot keep pace with consumption spending.