Some federal reserve officials have discussed the possibility of increasing interest rates as a way of fighting potential increases in expected inflation. if the public came to expect higher inflation rates in the future, what would be the effect on the short-run aggregate supply curve? show your answer graphically.

The common stock and debt of northern sludge are valued at $65 million and $35 million, respectively. investors currently require a return of 15.9% on the common stock and a return of 7.8% on the debt. if northern sludge issues an additional $14 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? assume that the change in capital structure does not affect the interest rate on northern’s debt and that there are no taxes.