Spencer took a 9 percent one-year fixed-rate loan to buy a new car. he expected to pay a real interest rate of 5 percent.
if at the end of the year spencer only paid a 3 percent real interest rate, which of the following is true?

a. the actual inflation rate was 6%
b. the nominal interest rate was 5%
c. the actual inflation rate was 4%
d. the nominal interest rate was 3%

Explain whether each of the following events increases or decreases the money supply. a. the fed buys bonds in open-market operations. b. the fed reduces the reserve requirement. c. the fed increases the interest rate it pays on reserves. d. citibank repays a loan it had previously taken from the fed. e. after a rash of pickpocketing, people decide to hold less currency. f. fearful of bank runs, bankers decide to hold more excess reserves. g. the fomc increases its target for the federal funds rate.