In the above figure, assume the economy starts out in equilibrium at point d. If the Fed increases the money supply so that the new aggregate demand curve is AD3, then the long-run equilibrium will be at point

In the Keynesian system, an increase in the money stock would

a. increase the interest rate, which, in turn, would increase aggregate demand and income. b. decrease the interest rate, which, in turn, would decrease aggregate demand and income. c. decrease the interest rate, which, in turn, would increase aggregate demand and income. d. decrease the interest rate but would have no effect on aggregate demand and income.

Other things equal, the equation for the real interest rate indicates that:

a. as inflation increases, the real interest rate will rise. b. as inflation increases, the nominal interest rate will fall. c. as inflation decreases, real income will fall. d. as inflation decreases, the real interest rate will rise. e. as inflation changes, the real interest rate will not change.