Give clear definitions of the nominal and real interest rates on one-year debt contracts then briefly explain why it is that, other things equal.

a) savers respond most often positively to a rise in the real rather than the nominal interest rate,

b) investment generally responds negatively to a rise in the real rather than the nominal, interest rate, and

c) the demand for real money balances responds negatively to a rise in the nominal, rather than the real, interest rate.