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:

Setae

Stiff, hair-like structures on the outer surface of animals, notably invertebrates, used for sensation, locomotion, or attachment to surfaces.

Aortic Arches

The series of curved blood vessels that diverge from the top of the heart; vital in the arterial blood circulation system.

Arthropods

A large phylum of invertebrate animals with exoskeletons, segmented bodies, and jointed appendages, including insects, arachnids, and crustaceans.

Jointed Appendages

Body parts, such as limbs or antenna, that are composed of segments connected in such a way that they can move.