If a Country's Nominal Interest Rate Is 5% and Its

Multiple Choice

If a country's nominal interest rate is 5% and its inflation rate is also 5%, then

A) the country's economy is in a liquidity trap.
B) exchange rates with other countries are likely to decline.
C) exchange rates with other countries are likely to increase.
D) monetary policy is likely to be very effective in stimulating the economy.
E) the country's economy has achieved monetary equilibrium.