8. Inflation-induced tax distortions Nick receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 3% per t 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 scenario and a high- inflation scenario. Given the real interest rate of 3% per year, find the nominal interest rate on Nick's bonds, the after-tax nominal interest rate, and the after-tax 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 6.5 3.0 3.0 Compared with higher inflation rates, a lower Inflation rate will nominal interest income. This tends to saving, thereby the economy's long-run growth rate. the after-tax real interest rate when the government taxes the quantity of investment in the economy and