If the Nominal Interest Rate Is 7 Percent and the Inflation

question 105

Multiple Choice

If the nominal interest rate is 7 percent and the inflation rate is 4 percent,what is the real interest rate?

• A) 2 percent
• B) 3 percent
• C) 5 percent
• D) 7 percent

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Definitions:

Payroll Tax

Taxes imposed on employers or employees, usually calculated as a percentage of the salaries that employers pay their staff.

Schedule H

A form filed with the IRS to report taxes owed on wages paid to a household employee.

Federal Taxes

Taxes imposed by the federal government on income, payroll, property, sales, and other activities, used to fund national programs and services.

AGI

Refers to Adjusted Gross Income; the calculation that determines how much of your income is taxable after specific deductions are applied.