Given a Nominal Interest Rate of 7 Percent,in Which of the Following

question 184

Multiple Choice

Given a nominal interest rate of 7 percent,in which of the following cases would you earn the lowest after-tax real interest rate?

• A)Inflation is 4 percent, and the tax rate is 25 percent.
• B)Inflation is 3 percent, and the tax rate is 20 percent.
• C)Inflation is 2 percent, and the tax rate is 15 percent.
• D)Inflation is 1 percent, and the tax rate is 10 percent.

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Definitions:

Government

A system or group of people governing an organized community, often a state.

Product

A good, idea, method, information, object, or service created as a result of a process and serves a need or satisfies a want.

Elastic Demand

A situation where the quantity demanded of a good or service significantly changes in response to a change in price.

Unitary Elastic

A situation where the percentage change in quantity demanded is equal to the percentage change in price, indicating a proportional relationship.