7. Identifying costs of inflation Miray owns and operates a store in a country experiencing a high rate of inflation. Each day, some of her employees spend time tracking changes in the overall price level and changing the price tags within the store and the price lists on the store's website. This is an example of the w of inflation. 8. Inflation-induced tax distortions Dmitri receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4.5% 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 10%. The following table shows two scenarios: a low-inflation scenarie and a high- inflation scenario. Given the real interest rate of 4.5% per year, find the nominal interest rate on Dmitri's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate Real Interest Rate Mominal Interest Rate After-Tax NMominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) (Percent) (Percent) Compared with lower inflation rates, a higher inflation rate will the after-tax real interest rate when the government taxes nominal interest income. This tends to W saving, thereby the quantity of investment in the economy and W the economy's long-run growth rate