Given a Nominal Interest Rate of 7 Percent, in Which

question 52

Multiple Choice

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

• 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:

Theory

A set of principles on which the practice of an activity is based or an explanation of the principles of phenomena.

Confirmation Bias

A cognitive bias that involves favoring information that confirms previously existing beliefs or biases.

Principle Of Falsifiability

The criterion for demarcating scientific from non-scientific statements; a theory must be testable and potentially able to be proven false.

Denialism

The choice to reject information or evidence that conflicts with an individual's beliefs, often seen in contexts such as climate change denial.