Assume that marginal income tax rates are constant for everybody and equal to 40%.  Also assume that expected after-tax real interest rates (which is what both lenders and borrowers care about) are not affected by anticipated inflation.
(a) Calculate the effect of a 3% decrease in anticipated inflation on the nominal interest rate.
(b) Show graphically the effect of a 1% decrease in expected inflation on the nominal interest rate in the market for loanable funds. 
(c) Suppose that the expected after-tax real interest rate is 2% and that the nominal interest rate is 5%. 

What is the anticipated rate of inflation? 8% anticipated?