The following figure shows credit demand and credit supply curves.
-Refer to the figure above.Assume that at point A the real interest rate is 8 percent,the inflation rate is 3 percent,and the total quantity of credit in the market at equilibrium (Q*) is equal to $100 million.Which of the following could be true about point B?
A) The rate of inflation is 2 percent, and the real interest rate is 6 percent.
B) The nominal interest rate is 5 percent, and the inflation rate is 6 percent.
C) The real interest rate is 8 percent, and the rate of inflation is 4 percent.
D) The nominal interest rate is 11 percent, and the inflation rate is 3 percent.
Correct Answer:
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