The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________.  

If the inflation rate is 5 percent and the real rate of interest is 3 percent, the nominal interest rate is

A) 8 percent. B) 5 percent. C) 3 percent. D) 2 percent.

In the circular flow diagram, firms' payments ________ the government.

A. flow into and out of B. do not affect C. only flow out of D. only flow into