While limited in their practical applications, the real value of the Pareto criteria is in allowing the public interest to be judged without making interpersonal utility calculations

Suppose that you took out a $1000 loan in January and had to pay $75 in annual interest. During the year, inflation was 6 percent. Which of the following statements is CORRECT?

A) The nominal interest rate is 7.5 percent and the real interest rate is 1.5 percent. B) The nominal interest rate is 7.5 percent and the real interest rate is 13.5 percent. C) The real interest rate is 7.5 percent and the nominal interest rate is 1.5 percent. D) The real interest rate is 6 percent and the nominal interest rate is 7.5 percent.

Under a fixed exchange rate system, the central bank must

a. have an unlimited supply of domestic currency. b. have a very large supply of foreign assets. c. follow a constant money growth rule. d. allow the money supply to adjust to keep interest rates and exchange rates unchanged.