Assume that consumption in the United States is $9,000 billion in 2009. If the MPC is 0.8 and disposable income increases by $1,000 billion in 2010, then the level of consumption in 2010 will be

When the nominal interest rate rises, the opportunity cost of holding money

A) rises and people hold more money. B) falls and people hold less money. C) falls and people hold more money. D) rises and people hold less money.

Assume that policy makers are pursuing a fixed exchange rate regime. Assume that the economy is initially operating at the natural level (i.e., Y = Yn). Suppose a reduction in wealth causes households to reduce consumption. This wealth-induced decrease in consumption will cause which of the following to occur?

A) The real exchange rate will be permanently higher in the medium run. B) The real exchange rate will be permanently lower in the medium run. C) The effects of this devaluation on the real exchange rate will be ambiguous in the medium run. D) The real exchange rate will be unchanged in the medium run.