Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's after-tax real rate of interest
a. will be 2.8 percent if inflation turns out to be 2 percent; it will be higher if inflation turns out to be higher than 2 percent.
b. will be 2.8 percent if inflation turns out to be 2 percent; it will be lower if inflation turns out to be higher than 2 percent.
c. will be 3.2 percent if inflation turns out to be 2 percent; it will be higher if inflation turns out to be higher than 2 percent.
d. will be 3.2 percent if inflation turns out to be 2 percent; it will be lower if inflation turns out to be higher than 2 percent.
b
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Refer to the table above. The current account balance is equal to
A) +$200 billion. B) +$220 billion. C) +$20 billion. D) -$220 billion. E) -$200 billion.
Other things constant, the quantity theory of money concludes that any increase in the quantity of money
A) decreases the demand for money. B) decreases in the aggregate price level. C) decreases the aggregate level of nominal income. D) proportionally increases the price level.