12. Inflation-induced tax distortions Darnell receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 20%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 4% per year, find the nominal interest rate on Darnell's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate Real Interest Rate Nominal Interest Rate After-Tax Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) (Percent) (Percent) 1.5 4.0 8.0 4.0 Compared with higher inflation rates, a lower inflation rate will the after-tax real interest rate when the government taxes nominal interest income. This tends to saving, thereby the quantity of investment in the economy and the economy's long-run growth rate.

Answers

Answer 1

Based on the given rates to Darnell, the nominal and after-tax real interest rates are:

Inflation rate 1.5%;

Nominal rate = 5.5%.After-tax nominal = 4.4%.After-tax real = 2.9%.

Inflation rate 8%;

Nominal rate = 12%.After-tax nominal = 9.6%.After-tax real = 1.6%.

What are the rates when inflation is 1.5%?

Nominal rate:

= Inflation + Real rate

= 1.5% + 4%

= 5.5%

After-tax nominal:

= 5.5% x (1 - 20% tax)

= 4.4%

After-tax real:

= 4.4% - 1.5% inflation

= 2.9%

What are the rates when inflation is 8%?

Nominal rate:

= Inflation + Real rate

= 8% + 4%

= 12%

After-tax nominal:

= 12% x (1 - 20% tax)

= 9.6%

After-tax real:

= 9.6% - 8% inflation

= 1.6%

Find out more on nominal and real tax rates at https://brainly.com/question/24233613.

#SPJ1


Related Questions

If an increase of oil prices leads to the overall price of goods to rise, what type of inflation is a
likely cause?
O
Deflation
o Hyperinflation
o Cost-push inflation
o Demand-pull inflation
h

Answers

When an increase in oil prices results in the overall rise in the price of goods then cost-push inflation is likely to occur. Thus the correct answer is B.

What is inflation?

When the prices of goods and services increase over the duration of time affecting the purchasing capacity of an individual is referred to as inflation.

When prices of goods and services increase as a result of growing manufacturing and raw material costs, this is referred to as cost-push inflation. Supply-side variables like rising wages and costs create cost-push inflation.

Therefore, option B cost-push inflation is the appropriate answer.

Learn more about inflation, here:

https://brainly.com/question/15692461

#SPJ1

30 points question is easy

Answers

30 points question is easy

so?

How vape advertisers target teens and children?

Answers

Answer:

Explanation:

children or teens who see other people having vapes at there age they might want one too.

Why do you think it is important to start exploring careers in middle school?

Answers

Answer:

Career exploration gives young students more time to understand the working world, so they can prepare for success. Once they discover their potential career, they can set realistic goals and work towards that job. They may be more open to talking to guidance counselors or people working in the field.

Exploring careers while in the young adult stage will be much more useful for your future. You are able to get a head start, and a feel for how it feels to have a position in different kinds of ways.

Bill decided that it was time to remodel his home. Among the features that Bill had included in his remodeling plan was the addition of several very large picture windows. Because of the great expense of the windows, Bill financed the cost through the issuance of a promissory note. The manufacturer of the windows sold the promissory note to a bank. Just after the promissory note matured, the windows began to leak badly. Bill refused to pay on his promissory note and brought action against the manufacturer for breach of contract. Will the bank recover on the promissory note?

Answers

Given the bank's holder in due course status, the argument of breach of contract will not be effective, for it is a limited defense that is not available against a holder in due course.

What is a promissory note?

A promissory note sometimes referred to as a payable note, is a legal instrument, in which one party promises to pay a fixed amount to another, either for a fixed or future period or for a payer, subject to certain terms and conditions.

Thus, Given the bank's holder in due course status, the argument of breach of contract will not be effective, for it is a limited defense that is not available against a holder in due course.

To learn more about promissory note refer:

https://brainly.com/question/948552

#SPJ1

Is the amount of one product that must be given up in order to produce an additional unit of another product?

Answers

The amount of one product that must be given in order to manufacture an additional unit of another product is referred to as Opportunity Cost.

What is an opportunity cost?

The opportunity cost of a particular activity choice refers to the loss of value or benefit that could be incurred through conducting that activity, relative to accomplishing an alternative activity offering a better return in value or gain.

Hence, Opportunity Cost refers to the amount of one product that must be given in order to manufacture an additional unit of another product.

learn more about opportunity cost here:

https://brainly.com/question/1549591

#SPJ1

Question 1-12
The Gross Domestic Product (GDP) of the United States is expanding currently. Which of
the following changes to these business cycle factors would be most likely to encourage GDP
growth to slow?

I. The automobile industry reduces hours for factory workers.
II. Banks offer lower interest rates for mortgages.
III. Consumers feel more secure in their jobs.

I only
III only
I and II only
II and III only

Answers

The change that would encourage GDP growth to slow is the automobile industry reduces hours for factory workers.

What would cause GDP growth to slow?

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

If the hours of work for factory workers is reduced, output would be reduced and this would slow GDP growth.

To learn more about GDP, please check: https://brainly.com/question/15225458

#SPJ1

40 points fast easy question. ………….

Answers

It’s depends which artical your reading since you have to re read the book to answer.

A hotel company that starts to sell the same linens and accessories on line that are found in the hotel is using
which of the following strategies to keep up revenue in the maturity stage?
O product modification
O brand extension
O marketing mix modification
O market modification

Answers

Answer:

Brand Extension

Explanation:

Just took the test and passed.

When considering the education and training a career requires you must be aware of _____.
a. the amount of time it will take
b. the amount of money it will take
c. the amount of effort it will take
d. all of the above
Please select the best answer from the choices provided A B C D

Answers

Answer:

The answer is simply D because all of these options happen during this period.

Please help!!

Declaring bankruptcy has a negative effect on your credit report and it stays on your report for ____ years.


10

1

50

Forever

Answers

Answer:

D or Forever

Explanation:

What are the keys to being an agile manufacturer?

Answers

some of the key to being an agile manufacturer are Product design that is flexible and customer-focused, information technology, corporate partners, and a knowledge culture.

What is  an agile manufacturer?

Agile manufacturer are the extremely strong on changing their features while keeping an eye on the competitors. They ensure the customer turning speed and agility to get the competitive advantage. it is the best approach in today's world.

Thus, product design that is flexible and customer-focused

For more details about Agile manufacturer, click here:

https://brainly.com/question/27813079

#SPJ1

A job seeker visits a mall to check out preferred brands of business attire. Which stage of the buying decision process is this?
A.
evaluation of alternatives
B.
information search
C.
post-purchase behavior
D.
purchase decision
E.
problem recognition

Answers

When someone is looking for a preferred product in the market, it is regarded as the purchase decision in the process(s) involved.

What is a purchase decision?

Purchase decision is one of the final stages involves in the process of buying any product or commodity. This stage also focuses on the study of consumer behavior and his rationality.

Hence, option D holds true of the purchase decision process.

Learn more about purchase decision here:

https://brainly.com/question/15071491

#SPJ1

the element of Bank reconcilation statement?​

Answers

Answer:

Get bank records

Get business records

Find your starting point

Run through bank deposits

Check the income on your book

Run through bank withdrawal

End balance

Explanation:

Get bank records : you need a list of transactions from the bank

Getting business records b open your ledger of income and outgoing

Run through bank withdrawal check expenses on your book

If you were the President of your college, what would change if your budget in your office we cut by 10%? How about by 25%? (10 pts)

Answers

The person might reduce the unnecessary expenditure of the college like decline in the regular festival, unnecessary of electricity and furniture will be reduced. The campaign should be highlighted to promote the college.

How to handle budget cuts?

Some of the ways to handle the budget cut are -

Search for a proportionate solution.Make adjustments that have been overdue.Cut the least painful part.Collaboration with merchants and suppliersWork with the team.Concentrate on revenue generators

Thus,reduce the unnecessary expenditure of the college like decline in the regular festival,

For more details about budget cuts, click here:

https://brainly.com/question/1179377]

#SPJ1

what is required when opening up a checking account?
A. copy of your last paycheck.
B. initial deposit.
C. salary.
D. credit card.

Answers

Answer:

B.

Explanation:

because you need a minimum of $25 to activate an account

[tex]\fbox\color{cyan}{Question}[/tex]

What is the difference between micro and macroeconomics?​

Answers

[tex] \small \red{\boxed{{\colorbox{white}{ANSWER}}}} [/tex]

microeconomics

Macroeconomics seeks to find a general perspective, at a national level,

micro

while microeconomics focuses on the individual's perspective, at a consumer level.

that's my answer

100 POINTS** How does the book " Sounder " Represent Christianity?

Answers

William H. Armstrong was the native of Lexington, Shenandoah Valley. he mentioned his school days and about the church in the book "Sounder".

What was mentioned in the "Sounder" book about the Christianity?

Armstrong changed his mind about the Bible. He has so many questions about that, due to which he start writing his own books to find the answers.

His main interest was to write about the questions of young and old people related to the Bible.

He appeals to various ages and Christianity.

Learn more about the book Sounder here:-

https://brainly.com/question/20630493

#SPJ1

Answer:

Explanation:

Armstrong changed his mind about the Bible. He has so many questions about that, due to which he start writing his own books to find the answers.

His main interest was to write about the questions of young and old people related to the Bible.

He appeals to various ages and Christianity.

Liza's budgets sales of $42,000 for May and $56,000 for June. Assume 60% of Liza’s sales are for cash. The remaining 40% are credit sales; credit customers pay the entire amount owed in the month following the sale.

Prepare the schedule of cash receipts from sales for June.

Answers

Answer:

$50400

Explanation:

May:

Sales = 42000

From cash = 42000*60% = 25200

From credit = 42000 - 25200 = 16800 (Jun cash in)

June:

Sales = 56000

From cash = 56000*60% = 33600

June cash receipts = 33600 + 16800 = 50400

When would your credit card company charge you an overlimit fee?
A. When you take a cash advance on your credit card
B. When you pay your bill late
C. When you transfer the balance from one credit card to another
D. When you charge more than your current credit limit

Answers

D) when you charge more than your current credit limit
Why: because my sister has done it and I did that question in my school
Hope this helps good luck!!

This is your first month working as a bookkeeper and you notice a discrepancy when trying to reconcile the bank statement to the book balance. There is missing check listed on the bank statement not recorded on the books. You bring this concern to your supervisor, and she responds that the accounting manager needs it done asap and to force it to reconcile. How would you handle this situation.

Answers

The manager should fire you

2. What are the main costs associated with higher education? Why might the financial burden of college actually be economically worthwhile?

Answers

The major expenses or costs that are associated with higher education are tuition and fees, books and suppliers, room and board, personal expenses, and transportation.

What do you mean by costs?

Costs refer to the price paid for acquiring, producing, or maintaining something.

The major costs associated with education are books and suppliers, tuition and fees, room and board, and transportation.

Growing demand, rising financial aid, and exploding costs of administrators are the reasons that led to the increase in college costs.

The financial burden of college will be worthwhile having higher lifetime earnings, indirect financial benefits jobs, etc.

Learn more about Costs here:

https://brainly.com/question/15135554

#SPJ1

Actors and actresses wear costumes to give people the impression that they are someone else. This makes their performances seem more believable or real. In everyday life, some people wear clothes and artifacts that conceal their true selves. Consider your views on creating false impressions and behaviors which are ethical and which are not. Give some examples.

Answers

Answer:

wearing a suit to a job interview: ethical wearing an expensive suit to impress others not ethical, wearing your best dress suit to a formal banquet ethical wearing a law enforcement uniform to gain respect not ethical, finally wearing a certain type of style clothes to fit in with the desired crowd not ethical hope this helps good luck!

what is the purpose of IDP

Answers

The basic purpose of IDP is to assist the employees in their career and personal development.

What do you mean by purpose?

The purpose means the reason for which something can be done or created.

The basic purpose of IDP is to help employees for reaching short and long-term career goals as well as to improve their current job performance.

Learn more about Purpose here:

https://brainly.com/question/24763308

#SPJ1


On January 1, $68,000 cash is borrowed from a bank in return for a 6% installment note with 24 monthly payments of $3,014 eac
(Round your answers to the nearest whole dollars.)
1. Prepare the journal entry to record the issuance of the note.
2. Prepare the
journal entry to record the first monthly interest payment.
View transaction list
Journal entry worksheet

Answers

Answer:

bro is this even a question

Explanation:

I don't know if I'm slow or if their is no question

Interest expense debit $340 note payable account debit $2, 674 cash account credit $3,014 is the entry for the first-month entry to payment.

What is the difference between account payable and note payable?

Accounts payable are short-term liabilities incurred for purchases made with suppliers and merchants on credit. Long-term liability accounts known as notes payable are incurred as a result of funding provided by banks and other lending institutions.

Cash                               68,000

Notes Payable                      68,000

   (Issuance of installment note)

For the first monthly payment, $68,000 is the initial amount borrowed and the interest rate is 6% per annum or 0.5% per month. Therefore, the interest portion of the payment is: Interest Expense = Outstanding Balance x Interest Rate

                = $68,000 x 0.005

                = $340

The remaining amount of the payment is applied towards reducing the outstanding balance: Payment = Installment Amount - Interest Expense

       = $3,014 - $340

       = $2,674

The journal entry to record the first monthly interest payment is:

Interest Expense                   340

Notes Payable - Current Portion 2,674

Cash                             3,014

 (Record first monthly payment)

Thus, The "Notes Payable - Current Portion" account represents the portion of the note that is due to be paid within the current year (i.e. within the next 12 months).

Learn more about notes payable here:

https://brainly.com/question/21315882

#SPJ2

A cash book is a
A. journal
B. ledger
C. Both journal and ledger
D. None of the above.​

Answers

Answer:

both journal and leadger

Answer:

Both Journal as well as ledger

Explanation:

Cash book acts as both Journal and ledgerCashbook registers the transactions for first time so it works as journal.Then it transfers them to ledger accounts by saving it

Option C

Supply chain management includes all logistics management activities as well as …
Select one:

A.
manufacturing operations and sales (applied marketing).



B.
procurement and sales.



C.
manufacturing operations and sales.



D.
materials management and physical distribution.



E.
procurement and manufacturing operations

Answers

E. It seems to be the odd one out

how do you make a lot of money fast

please help i have none

Answers

Answer:

you gottaa start working and saving up

Explanation:

Which of the following characteristics are not associated with perfect competition?

i) Influence over market price.
ii) Product differentiation.
iii) Complete information.
iv) Agreements between sellers to control supply.
v) Economic profit in the long ru

Answers

IV. That is against the law

Which of the following describes the money you must pay to own an insurance policy?

a
Principal
b
Premium
c
Deductible

Answers

Answer: Premium

Explanation: T

he premium is the per month payment you make to retain insurance, and the deductible is what you pay a provider before insurance takes over.

Other Questions
Complete the following Spanish sentence with the correct conjugation of The Preterite (Simple Past Tense):Yo____________________. (comer) Research indicates that individuals experiencing depression often experience anxiety disorders. please select the best answer from the choices provided t f Why do good speakers use some of the specialized vocabulary related to a topic?Specialized vocabulary helps the speaker remember his or her main points.Some listeners will get bored if they dont hear at least a few words that they dont know.Listeners will believe that the speaker knows a lot about the topic if he or she uses those words. 2122232425The Battle of Antietam showed the Union thatO was getting weak.O it had strong leadership.O it could win the war.O it needed help from Great Britain.A.it was getting weake good valuable survival techniques 3. Convert the measure from radian to degree. The base of a triangular prism is a right triangle with a base of 6 feet, a height of 8 feet, and a third side length of 10 feet. The height of the prism is 10 feet. Find the surface area of the prism. The list 11, 20, 31, 51, 82 is an example of a list of five strictly positive integersarranged in ascending order and of which we obtain the third integer by adding thefirst and second integers, the fourth by adding the second and thirdintegers, and the fifth by adding the third and fourth integers. How muchsuch lists of five positive integers have 124 as the fifth integer? Embodied cognition is the idea that: a) the body provides oxygen and nourishment that allows the brain to survive b) the brain and body are not separated c) thinking is supported by the body d) the body is important for emotions A+certain+protein+was+found+to+contain+0. 579%+zinc+by+mass. +determine+the+minimum+molecular+mass+of+the+protein Mika has One Direction of ______, so it breaks into sheets. what's the answer?? please help me How did homes and lifestyles change after WWII and why? As of 2016, Illinois has a population of 12, 801,539 people and has a land area of 55,519 square miles. Texas has a population of 27,862,596 people and a land area of 261, 232 square miles. Based on this data, which state has the greater population density? Move the correct state to the first blank, and move numbers into the remaining blanks to justify the answer. The state with the greater population density is because Illinois Texas 107 231 55,519 261, 232 12,801, 539 27,862, 596 What is the volume of a right circular cylinder with a base radius of 6 feet and a height of 10 feet? 900 cubic meters 120 cubic meters 180 cubic meters 360n cubic meters Pre-algebra Course challenge pls help A regular-size box of crackers measures 2 inches by 9 inches by 14 inches. The manufacturer also sells a snack-size box that has a volume that is 1/4 of the volume of the regular-size box. What is the volume of the snack-size box Which idea is expressed in both excerpts? equality is an important american value. the future of america is largely unknown. freedom is only achieved through struggle. civil war is an evitable part of any nation. Write and solve an equation to find the value of x. Which choice best explains the effect of the author's use of faulty reasoning?