Write the way for answer: Suppose the expected inflation rate is 0.01, the tax rate on interest income is 0.3, and the expected real after-tax interest rate is 0.0145. What is the nominal interest rate? A) 0.035 B) 0.030 C) 0.025 D) 0

Write the way for answer: Suppose the expected inflation rate is 0.01, the tax rate on interest income is 0.3, and the expected real after-tax interest rate is 0.0145. What is the nominal interest rate? A) 0.035 B) 0.030 C) 0.025 D) 0

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 10SQ

See similar textbooks

Related questions

Q: 5. Calculate the one-year real rate of interest faced by the U.S. government given that expected…

A: Nominal interest rate is the interest rate charges before calculating the inflation rate into…

Q: If the rate of inflation is 2%, what are the before-tax real interest rate and your after-tax rate…

A: The Fischer equation defines the relationship between the real interest rate , nominal interest rate…

Q: 2. The price of natural gas has been zooming up from $4 per MMBTU on December 31, 2021 to $8 on…

A: Introduction The price of natural gas has been zooming up. Price on Dec. 31, 2021 = $4 MMBtu Price…

Q: Inflation and interest rates a) Define/explain the consumer price index. b) Suppose that the nominal…

A: Note: Since, you've posted question with multiple sub-parts, we will solve the first the first three…

Q: What will be the real interest rate if:- Nominal interest rate = 5% Inflation rate = 3.3%

A: The data presented in the above question is:- Nominal interest rate = 5% Inflation rate = 3.3%…

Q: Dean borrows $400 from Tim. Tim wants to make a 7% real return on his money, so they both agree on…

A: Inflation rate and rate of return: The inflation rate determines the growth rate of the overall…

Q: illan Le What is the real interest rate?

A: Real interest rate is defined as the rate of return adjusted for inflation. It is the real return…

Q: Assume the inflation rate is 100% per year and the nominal rate of interest is 700% per year. (This…

A: In the realm of economics, inflation, nominal interest, and real interest form a network of…

Q: QUESTION 10 If prices grow by 2.9% every year, over 9 years, what is the total inflation rate? Write…

Q: Suppose you borrow $1,000 of principal that must be repaid at the end of two years, along with…

A: Inflation refers to the sustained increase in the general price level of goods and services in an…

Q: Your rich aunt is going to give you an end-of-year gift of $1,000 for each of the next 10 years.…

A: If the annual real interest-rate is 4% & the inflation-rate is 6% then the MARR is calculated as…

Q: nominal interest rate is 4% .Suppose that the actual inflation rate turns out to be 4% as well. What…

A: The Fisher effect depicts the relationship between real and nominal rate of interest…

Q: 1) If the expected inflation rate is negative A) the real interest rate is less than the nominal…

A: Economics is a branch of social science that describes and analyzes the behaviors and decisions…

Q: What is the inflation free (real interest rate) if the market rate is 12.6% and the inflation rate…

A: The interest rate which is calculated without taking in account the value of inflation is known as…

Q: 50) You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the…

A: The after-tax real interest rate is negatively connected to the inflation rate. As the inflation…

Q: An increase in the budget deficit is the result of: (a) Expansionary monetary policy; (b)…

A: Since you have posted multiple questions, we will solve first question for you. If you want other…

Q: The.... rate is equa to the ...... rate ...... the ....... rate a) real interest / nominal interest…

A: The question is based on the Fisher equation.

Q: Consider the following Price Index in 2017 86 Price Index in 2018 100 Price Index in 2019 108 Price…

A: The price index measures the changes the price level of the market basket of goods and services. It…

Q: Suppose that at the start of 1999, Ari invests their money in a savings account earning 3.6%…

A: Real interest rate = Nominal interest rate-rate of inflation

Q: Using you answer for Question 2, what will be the price per MMBtu of natural gas on June 30, 2022 if…

A: The price per MMBtu can be calculated by using the following equation. Price per MMBtu= Pi*(1+i)t

Q: 14. If the nominal interest rate is 8% and the inflation rate is 3%, the real interest rate A) 11%…

A: here we calculate Real interest and choose correct option which are as follow-

Q: 37) If the expected inflation rate was 2.5%, the expected real interest rate was 4.0%, and the real…

A: Given; Expected inflation rate= 2.5% Expected real interest rate= 4.0% Real interest rate= 5.5%

Q: Consider the following hypothetical tax schedule, expressed in nominal terms, for the tax year…

A: A taxpayer's average tax rate determines the burden of tax as it computes the share of income a…

Q: If the expected inflation rate is 4 percent and the nominal interest rate is 9 percent, then the ex…

A: According to the Fisher Equation: The real interest rate is an inflation-adjusted nominal interest…

Q: Determine how the following situations will affect the nominal interest rate levels: a. There is the…

A: a) If there is a higher budget deficit, it will increase the nominal interest rate. The reason is…

Q: Bob loans his sister-in-law $1000 so she can make her rent. She must pay it back after one year. If…

A: We know that the real rate of interest is the nominal rate of interest minus inflation Given that…

Q: Suppose a bank wants to earn a real rate of interest equal to 7.23% and they expect the rate of…

A: Interest paid on loans that do not take inflation into consideration is the nominal interest rate.…

Q: Refer to Table 3. Assume that this economy produces only two goods Good X and Good Y. If year 1 is…

A: Price of Basket of Goods in Year 1 = 60 x $1 + 100 x $0.8 = $140 Price of Basket of Goods in Year 2…

Q: ou purchase a certificate of deposit that pays an advertised rate of 2.30% interest per year. Your…

A: The rate of return signifies the interest rate paid on the deposited amount. The nominal rate of…

Q: Suppose the bank give you a loan at 4.46% interest rate but the economy experiences inflation of…

A: The relationship between inflation and inflation is given by the Irving fisher where interest rate…

Q: Let the rate of inflation = 4% per year. What is the end-of-year value if we begin the year with…

A: Given: Rate of inflation=4% a. Beginning value=$1000 b. Beginning value=$1 trillion To find: end of…

Question

A) 0.035

B) 0.030

C) 0.025

D) 0.020

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.
The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=940, year 2=970, year 3=1000, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.
Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.
Answer is near about 7 , please show your work how to solve this ( Thanks in advance)
14. If the nominal interest rate is 8% and the inflation rate is 3%, the real interest rate A) 11% B) 5% C) -5%. D) 8/3 = 2.67% E) cannot be determined from the information given %3!
50) You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then what is the tax rate? A) 28.00 percent. B) 36.25 percent. C) 43.75 percent. D) 67.50 percent.
If the inflation rate is 6% and Susan receives a 6% increase in income, then, over the year, Susan's: (a) Real and nominal income both remain unchanged; (b) Real and nominal income both rise; (c) Real income rises but nominal income remains unchanged; (d) Nominal income rises but real income remains unchanged. Given the import function, Z = 300 + 2/3Y, which of the following statements is correct? (a) The marginal propensity to save is 1/3; (b) The induced component is 300; (c) 2/3 is the proportion of any income spent on imports; (d) None of the statements is correct. An increase of R5 billion in income in a macroeconomy leads to an increase in R3 billion in consumption spending. From this information, we can determine that the marginal propensity to save in this economy is: (a) 0.6; (b) 0.5; (c) 0.3; (d) 0.4.
Help!!!!
Bob loans his sister-in-law $1000 so she can make her rent. She must pay it back after one year. If Bob charges her 6 percent interest and wants to get a real return (real interest) of 3.5 percent, Bob must anticipate that inflation will be___________ percent over the next year. (Carefully follow all numeric instructions. Enter your answer "as a percent, but without the percentage sign." In other words, if you think Bob predicts 99.99 percent inflation, just enter 99.99 in the blank.)
Help urgent
Suppose you borrow $1,000 of principal that must be repaid t the end of two years, along with interest of 5 percent a year. If the annual inflation rate turns out to be 10 percent, Hint: Future value = Present value x (1 + Growth in prices), where t is the number of years evaluated. Real value of loan repayment Amount of loan x (1 + Real interest rate) Instructions: Round your responses to the nearest whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. What is the real rate of interest on the loan? % b. What is the real value of the principal repayment? c. Who loses, the debtor or the creditor? Debtor O Creditor
Note: the answer should be typed.