Given a Nominal Interest Rate of 5 Percent, in Which

question 250

Multiple Choice

Given a nominal interest rate of 5 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

• A)Inflation is 3 percent; the tax rate is 20 percent.
• B)Inflation is 2 percent; the tax rate is 40 percent.
• C)Inflation is 1 percent; the tax rate is 60 percent.
• D)The after-tax real interest rate is the same for all of the above.

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Definitions:

Olfaction

The sense of smell, a chemical sensing system that allows the detection and perception of odors in the environment.

Gustatory Cells

Specialized sensory cells located within taste buds on the tongue, responsible for the detection of taste.

Fungiform Papillae

Small, mushroom-shaped structures on the tongue, containing taste buds responsible for the perception of taste.

Filiform Papillae

Filiform papillae are small, conical bumps on the surface of the tongue that lack taste buds and help in the mechanical movement of food.