Suppose That a Change in the Expected Inflation Rate Leads

question 3

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 falls from 6 percent to 0 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:

Warehouse

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A contract or agreement that has been completely signed by all parties involved and all the terms are fully met.

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The mutual decision of parties involved in a contract to cancel or nullify the agreement.

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An assertion or action by a party indicating that he or she will not perform an obligation that he or she is contractually obligated to perform at a future time.