Suppose the nominal interest rate is rn and inflation is i, Ask an Expert

Economics

Suppose the nominal interest rate is rn and inflation is i. Assume 0 < rn < 1 and 0 < i < 1. Suppose the approximation that relates real interest rate to the nominal interest rate and inflation, rr = rn − i holds. Suppose t with 0 < t < 1 be the tax rate on interest.

A. Write a formula for the after tax interest rate R1 in an inflation protected tax system.

B. Write a formula for the after tax interest rate R2 when tax brackets do not provide relief from inflation.

C. Compare R1 and R2. How does the difference between the two change if inflation rate doubles?

View complete question

Business Economics, Economics

Category:- Business Economics
Reference No.:- M91524171

Have any Question?Write your Review or question?

Related Questions in Business Economics

Suppose the market demand and market supply curves are

Suppose the market demand and market supply curves are given by the following equations: QD = 120 - 10P QS = 20P a. Draw a figure of supply and demand representing this market. Be sure to label the axes and intercepts. ( ...

A sample of n 4 individuals is selected from a normal

A sample of N = 4 individuals is selected from a normal population with μ = 70 and σ = 10. A treatment is administered in the sample, and after the treatment, the sample mean is found to be = 75. a. On the basis of the s ...

Suppose after collecting data on an existing firms actual

Suppose, after collecting data on an existing firm's actual short-run ouput, the following production function is found to match the data: TP = Q = 5*L + 0.6*L2 - 0.01*L3 1. Using the equation above, find the following ...

What are the implications of the shift from medical care to

What are the implications of the shift from medical care to the focus on overall health conditions?

Is implementing tqm can be difficult amp expensive1 what do

Is Implementing TQM can be difficult & expensive. 1) What do you think are the top 3 or 4 causes of implementation failure? 2) Why are these issues are such a problem.

What are the key channels by which fiscal policy affects

What are the key channels by which fiscal policy affects output in a closed versus open economy? Using the models studied in class, discuss what is meant by "crowding out", and how the crowding out effect works in an ope ...

University bookstores order books that instructors adopt

University bookstores order books that instructors adopt for the courses. The number of copies order matches the projected the demand. However, at the end of the semester the bookstore has too many copies on hand and mus ...

Annual demand and supply for the mylan company is given

Annual demand and supply for the Mylan company is given by: Q D = 5,000 + 0.5 I + 0.2 A - 100P, and Q S = -5000 + 100P where Q is the quantity per year, P is price, I is income per household, and A is advertising expen ...

Each entry-level software programmer in palo alto

Each entry-level software programmer in Palo Alto, California, has either high or low ability. All potential employers value a high-ability worker at $12,000 per month and a low-ability worker at $6,000. The supply of hi ...

A psychologist examining art appreciation selected an

A psychologist examining art appreciation selected an abstract painting that had no obvious top or bottom. Hangers were placed on the painting so that it could be hung with any one of the four sides at the top. The paint ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Business Economics Expert