Suppose the nominal interest rate is 0.04, the expected inflation rate is 0.025, and the expected real after-tax interest rate is 0.005. What is the tax rate on interest income?
A. 0.30
B. 0.15
C. 0.25
D. 0.20
Answer: C
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Which of the following best describes a typical business cycle?
A) Economic expansions are followed by economic contractions. B) Inflation is followed by unemployment. C) Trade surpluses are followed by trade deficits. D) Stagflation is followed by inflationary economic growth.
The base year in the consumer price index (CPI) is:
a. given a value of zero. b. a year chosen as a reference for prices in all other years. c. always the first year in the current decade. d. established by law.
When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is
a. downward sloping. b. upward sloping. c. horizontal. d. vertical.
If a nation's currency appreciates in the short run its net exports and aggregate demand are most likely to change in which of the following ways?
a. decrease; decrease b. decrease; increase c. increase; decrease d. increase; increase e. no change; decrease