Refer to the above figures. Which of the panels would be consistent with the situation in which external costs exist?

The real interest rate is

a. the premium that borrowers must pay in order to acquire more purchasing power. b. the reward lenders receive in exchange for their willingness to delay consumption into the future. c. equal to the money interest rate minus the inflationary premium. d. all of the above.

Under a system of flexible exchange rates, an increase in demand for a nation's currency in the foreign exchange market will

a. cause the nation's currency to appreciate. b. make it more expensive for the nation to import goods. c. cause the nation's balance on current account to shift toward a surplus. d. make it less expensive for foreigners to buy the nation's goods.