Given U.S. tax laws, persistently high inflation may result in:
a.slower economic growth because the after-tax nominal interest rate is lower.b.slower economic growth because the after-tax real interest rate is lower.c.faster economic growth because the after-tax real interest rate is higher.d.faster economic growth because the after-tax nominal interest rate is higher.

Question

OgLonetar3131 OgLonetar3131

18-11-2019
Business

contestada

Given U.S. tax laws, persistently high inflation may result in:
a.slower economic growth because the after-tax nominal interest rate is lower.b.slower economic growth because the after-tax real interest rate is lower.c.faster economic growth because the after-tax real interest rate is higher.d.faster economic growth because the after-tax nominal interest rate is higher.

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cancinodavidq cancinodavidq · Answer 1 · 2019-11-20T22:05:27+01:00

cancinodavidq cancinodavidq

20-11-2019

Answer:

Option b . Slower economic growth because the after-tax real interest rate is lower.

Explanation:

The after-tax real interest rate =nominal rate -nominal rate *tax rate -inflation

so the after-tax rate cuts the real rate by the product of nominal rate *real rate. The decreased real interest rate decreases the investment in the economy and growth decreases.

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