When Nominal Interest Rates Are Are Zero, the AD Curve

Multiple Choice

When nominal interest rates are are zero, the AD curve has a ________ slope because when aggregate output decreases the monetary authorities ________ lower the nominal interest rate. As inflation rises the real interest rate _______which will ________ investment and aggregate output.

A) negative; can; increases; decrease
B) negative; cannot; decrease; increase
C) positive; cannot; increases; decrease
D) positive; can; decreases; decrease