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Gilberto 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 Gilberto'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) 2.5 4.0 8.0 4.0 Compared with lower inflation rates, a higher inflation rate will decrease the after-tax real interest rate when the government taxes nominal interest income. This tends to discourage saving, there by decreasing the quantity of investment in the economy and decreasing the economy's long-run growth rate. Grade It Now Save & Continue Copyright Notices Terms of Use Privacy Notice Security Notice Accessibility
Indicate the various components of GDP when it is derived by the resource cost-income approach. Calculate using the resource cost-income approach.
What does Erikson mean by “is prone to perversion by destructive forms of conscientiousness?” How can someone who is conscientious be destructive? Can people trying to "do good" end up harming others?
Consider an economy where, consumer’s utility function is given as U(C,L)=C-(1/2)L2 . where C is consumption and L is labor. The production technology is Y=(1.6)L-(1/2)L2. The turnover cost per labor is (0.36)/(w/p). What happens to t as real wage in..
A permanent endowment at Wartburg College is to award scholarships to engineering science students twice per year. The first awards are to be made beginning 11.5 years after a $2.2 million lump sum donation is made.
Estimated regression equation for which quantifies the demand for Widget
The short-run supply curve of a competitive industry is derived by. Along the long-run supply curve of an increasing-cost industry that is characterized by perfect competition, all of the following can vary except. For the case of an increasing-cost ..
The demand for your college newspaper is 6,000 copies each week if the paper is given away free of charge, and drops to 5,000 each week if the charge is 10¢/copy. However, the university is prepared to supply only 900 copies per week free of charge, ..
Suppose your business had an e-commerce Web site where it sold goods and accepted credit card payments. Discuss the major security threats to this Web site and their potential impact. What can be done to minimize these threats?
Which of the following statements concerning the long-run average cost curve of economic theory is (are) not true?
The amount of money a person must deposit 3 years from now in order to withdraw $10,000 per year for 10 years beginning 15 years from now at an interest rate of 10% per year is closest to:
Which of the following is NOT a possible way for a price-fixing scheme on potatoes to fall apart?
From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $14 million in withdrawals from other banks’ ATM machines. Estimates suggest t..
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