Sam Deposits Money into an Account with a Nominal Interest

question 89

Multiple Choice

Sam deposits money into an account with a nominal interest rate of 4 percent.He expects inflation to be 1.5 percent.His tax rate is 32 percent.Sam's after-tax real rate of interest

• A)will be 1.2 percent if inflation turns out to be 1.5 percent;it will be higher if inflation turns out to be lower than 1.5 percent.
• B)will be 1.2 percent if inflation turns out to be 1.5 percent;it will be lower if inflation turns out to be lower than 1.5 percent.
• C)will be 1.7 percent if inflation turns out to be 1.5 percent;it will be higher if inflation turns out to be lower than 1.5 percent.
• D)will be 1.7 percent if inflation turns out to be 1.5 percent;it will be lower if inflation turns out to be lower than 1.5 percent.

Identify factors contributing to changes in real wages across different time periods.

Interpret labor supply curves and analyze the effects of substitution and income effects on labor supply decisions.

Apply knowledge of consumer price index (CPI) to analyze real income changes.

Understand the concept of monopsony power and its impacts on wages and employment.

---

Definitions:

U.S. Governments

The federal government of the United States, composed of three branches: legislative, executive, and judicial.

Property Taxes

Levies on property owned by individuals or entities, typically based on the property's value, and used as revenue for local governments.

Tax Revenue

The income that is gained by governments through taxation, used to fund public services, infrastructure, and government operations.

Local Governments

Administrative bodies governing areas within a country below the level of the state or national government.