Question: C. We know that real interest rate = nominal interest rate - inflation rate; that's the Fisher equation. The economy teeters on the edge of

C. We know that real interest rate = nominal interest rate - inflation rate; that's the Fisher equation. The economy teeters on the edge of a recession, and buyers and sellers alike expect inflation to fall from 0% to -2%. All other factors (G, T, IM, and EX) are those given in the initial setup. Plug the Fisher equation into both the supply and demand curves for loanable funds and suppose that inflation is -2 in both equations. What happens to equilibrium investment when everyone expects inflation to change in this way? What happens to the REAL interest rate

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