3. This problem asks you to calculate the actual (as opposed to the expected) after-tax real interest

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3. This problem asks you to calculate the actual (as opposed to the expected) after-tax real interest rate using annual data from 1961 to the present. The formula for the actual after-tax real interest rate is (1 - t)i - 7T, where i is the nominal interest rate, t is the tax rate, and 7T is the inflation rate. Use the average for each year of the three-month Treasury bill interest rate for the nominal interest rate i and measure annual inflation 7T by the CPI inflation rate from December to December. Take the tax rate t to be the ratio of total (Federal plus state and local) government receipts to nominal GDP in the fourth quarter of each year. In what periods did financial conditions favor savers? Borrowers?

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