If the price level rises from 125 to 150 from one year to the next, then the rate of inflation that year is 25 percent.

Which of the following are taxpayers not allowed to deduct from taxable income?

a. state income taxes b. local income taxes c. property taxes d. interest on auto loans

One reason the Fed tolerates ongoing inflation is because it

a. believes that the CPI understates the actual inflation rate b. believes that the CPI overstates the actual inflation rate c. accepts the idea that a zero inflation rate would make labor markets work more smoothly d. wants to focus more on price stability than on full employment e. is uncertain about the long-run stability of the Phillips curve