The bonds offer a real interest rate of 4% pem The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 20%. The following table shows two scenarios: a low-inflation scenario and a high- inflation scenario. Given the real interest rate of 4% per year, find the nominal interest rate on Nick's bonds, the after-tax nominal interest rate, and the after-tax interest rate under each inflation scenario. Inflation Rate Real Interest Rate (Percent) (Percent) Nominal Interest Rate After-Tax Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) 1.5 4.0 8.0 4.0 the after-tax real interest rate when the government taxes Compared with higher inflation rates, a lower inflation rate will the quantity of investment in the economy and nominal interest income. This tends to the economy's long-run growth rate. saving, thereby

The bonds offer a real interest rate of 4% pem The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 20%. The following table shows two scenarios: a low-inflation scenario and a high- inflation scenario. Given the real interest rate of 4% per year, find the nominal interest rate on Nick's bonds, the after-tax nominal interest rate, and the after-tax interest rate under each inflation scenario. Inflation Rate Real Interest Rate (Percent) (Percent) Nominal Interest Rate After-Tax Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) 1.5 4.0 8.0 4.0 the after-tax real interest rate when the government taxes Compared with higher inflation rates, a lower inflation rate will the quantity of investment in the economy and nominal interest income. This tends to the economy's long-run growth rate. saving, thereby

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter17: Inflation

Section: Chapter Questions

Problem 20SQ

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Tim receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 3% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 20%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 3% per year, find the nominal interest rate on Tim's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Real Interest Rate After-Tax Nominal Interest Rate (Percent) After-Tax Real Interest Rate Inflation Rate Nominal Interest Rate (Percent) (Percent) (Percent) (Percent) 1.5 3.0 6.5 3.0 Compared with lower inflation rates, a higher inflation rate will interest rate when the government taxes nominal interest income. This tends to the after-tax real * the quantity of investment in the economy and…
Gavin receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 10%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 4% per year, find the nominal interest rate on Gavin's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate Real Interest Rate Nominal Interest Rate After-Tax Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) (Percent) (Percent) 1.5 4.0 7.0 4.0 Compared with lower inflation rates, a higher inflation rate will (increase/decrease) the after-tax real interest rate when the government taxes…
Sean receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4.5% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 10%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 4.5% per year, find the nominal interest rate on Sean's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate Real Interest Rate Nominal Interest Rate After-Tax Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) (Percent) (Percent) 2.0 4.5 8.5 4.5 Compared with lower inflation rates, a higher inflation rate will the after-tax real interest rate when the government taxes nominal interest income. This…
Chris receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4.5% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 10%. The following table shows two scenarios: a low-inflation scenario and a high- inflation scenario. Given the real interest rate of 4.5% per year, find the nominal interest rate on Chris's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate Real Interest Rate Nominal Interest Rate After-Tax Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) (Percent) 4.5 4.5 (Percent) 3.0 9.5 Compared with lower inflation rates, a higher inflation rate will nominal interest income. This tends to the economy's long-run growth rate. saving, thereby the after-tax real interest rate when the…
Jake receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4.5% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 10%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 4.5% per year, find the nominal interest rate on Jake's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate (Percent) Real Interest Rate (Percent) Nominal Interest Rate (Percent) After-Tax Nominal Interest Rate (Percent) After-Tax Real Interest Rate (Percent) 2.0 4.5 9.5 4.5 Compared with lower inflation rates, a higher inflation rate will (a. increase, b. decrease) the after-tax real interest rate when the…
Antonio receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4.5% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 10%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 4.5% per year, find the nominal interest rate on Antonio's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate (Percent) After-Tax Nominal Interest Rate (Percent) Real Interest Rate Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) 2.0 4.5 4.5 9.5 Compared with lower inflation rates, a higher inflation rate will quantity of investment in the economy and the after-tax real interest rate when the government taxes nominal interest income. This…
Suppose that Lisa lends Alex $1,000, which Alex must repay after one year with an interest payment of 10%. When Lisa lends money to Alex, she expects that the inflation rate over the year will be 3%. However, after she lends the money, the actual inflation rate for the year turns out to be 5%. In this scenario, who gains from the higher than expected inflation rate?
Felix receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 2.5% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 10%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 2.5% per year, find the nominal interest rate on Felix's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Compared with lower inflation rates, a higher inflation rate will _______ (increase/decrease) the after-tax real interest rate when the government taxes nominal interest income. This tends to ________ (encourage/discourage) saving, thereby ________ (increasing/decreasing) the quantity of investment in the economy and ________ (increasing/decreasing) the economy's long-run…
Larry receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4.5% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 10%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 4.5% per year, find the nominal interest rate on Larry's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate Real Interest Rate Nominal Interest Rate After-Tax Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) (Percent) (Percent) 2.0 4.5 9.5 4.5 Compared with lower inflation rates, a higher inflation rate will the after-tax real interest rate when the government taxes…
Suppose you have $150,000 in a bank term account. You earn 5% interest per annum from this account. You anticipate that the inflation rate will be 3% during the year. However, the actual inflation rate for the year is 6%. Calculate the impact of inflation on the bank term deposit you have. ii. Examine the effects of inflation in your city of residence with attention to food and accommodation expenses. iii. The Australian Bureau of Statistics (ABS) reported in May 2016 that the civilian population in Australia over 15 years of age was 19.8 million. Of this population of 19.8 million Australians, 12.5 million were employed and 0.7 million were unemployed. Calculate Australia’s labor force and the number of people in the civilian population who were not in the labor force?
Raphael receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 2.5% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 10%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 2.5% per year, find the nominal interest rate on Raphael's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate (Percent) Real Interest Rate (percent) Nominal Interest Rate (Percent) After-Tax Nominal Interest Rate (Percent) After-Tax Real Interest Rate (percent) 2.0 2.5 7.5 2.5
if the nominal interest rate is 18 percent and the real interest rate is 10 percent, the inflation rate is