The following graph shows the supply of and demand for capltal in a market over the last yeac. You can see that the demand for capltal has increased over the last year (the demand curve shifted to the right). The Federal Reserve (the Fed) decided to relax its monetary policy and expanded the money supply. Expected inflation decreased. Households began saving a greater percentage of their income. New technological advances opened up more production opportunities for businesses. Does it appear that the economy has strengthened or weakened over the past year? Strengthened Weakened If the inflation rate was 2.60% and the nominal interest rate was 6.80% over the last year, what was the real rate of interest over the last year? Disregard cross-product terms; that is, If averaging is required, use the arithmetic average. 4.83% 5.25% 4.20% 3.57%