Given a Nominal Interest Rate of 8 Percent,in Which of the Following

question 10

Multiple Choice

Given a nominal interest rate of 8 percent,in which of the following cases would you earn the highest after-tax real interest rate?

• A)Inflation is 5 percent;the tax rate is 40 percent.
• B)Inflation is 4 percent;the tax rate is 30 percent.
• C)Inflation is 3 percent;the tax rate is 45 percent.
• D)Inflation is 2 percent;the tax rate is 50 percent.

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Definitions:

Tariff

A tax on imported goods.

Shifts

refers to movements or changes in economic indicators, demand/supply curves, or other economic paradigms, often due to external factors.

Economies of Scale

The cost advantages that enterprises obtain due to scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Selling Below Cost

The practice of offering goods or services for sale at a price that is less than the total cost to produce and sell them.