Interest rates are important in explaining economic activity (a) (2 points) Using a correctly labeled money market graph, describe how an increase in the income level will affect the nominal interest rate in the short run. (b) (2 points) Using a correctly labeled loanable funds market graph, describe how a decision by households to increase savings for retirement will affect the real market interest rate in the short run. (c) (2 points) Suppose the nominal interest rate has been 6% with no expected inflation. If inflation is now expected to be 2%, determine the value of each of the following. i . The new nominal interest rate ii. The real interest rate