Aggregate Demand and Supply Analysis

Multiple Choice

Aggregate Demand and Supply Analysis
-In the figure above,assume that output is $10.5 trillion,while potential output is $12 trillion.If a fiscal stimulus package is implemented quickly,raising output to $12 trillion,while inflation remains constant at one percent,then the figure implies that the real interest rate will be ________ percent.

A) 1.5
B) zero
C) one
D) 0.5
E) 2.5