Suppose That a Change in the Expected Inflation Rate Leads

question 51

Multiple Choice

Suppose that a change in the expected inflation rate leads supply and demand to adjust so that the expected real interest rate is unchanged at 3.0 percent.The tax rate is 30 percent.Initially, the expected inflation rate is 3.0 percent.If the expected inflation rate rises from 3 percent to 6 percent, the after-tax expected real interest rate

• A)rises by 1.8 percent.
• B)rises by 0.9 percent.
• C)falls by 0.9 percent.
• D)falls by 1.8 percent.

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Definitions:

Capillary Exchange

The process by which nutrients, gases, and wastes are exchanged between blood and tissues through capillary walls.

Precapillary Sphincter

A ring-like muscle at the entrance of capillaries that regulates blood flow into the capillary.

Atrial Natriuretic Hormone

A hormone, secreted by heart's atria, that regulates blood pressure by reducing sodium ion concentration in the blood, thus decreasing blood volume.

Vasopressin

A hormone produced by the pituitary gland that helps regulate water balance in the body and constriction of blood vessels.