Hugh has the choice between investing in a City of Heflin bond at 5.70 percent or investing in a Surething Inc. bond at 9.25 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, what interest rate does Surething Inc. need to offer to make Hugh indifferent between investing in the two bonds? (Round your answer to 2 decimal places.) Interest rate Interest rate % Song earns $114,000 taxable income as an interior designer and is taxed at an average rate of 20 percent (i.e., $22,800 of tax). Answer the questions below assuming that Congress increases the income tax rate such that Song's average tax rate increases from 20 percent to 25 percent. a. What will happen to the government's tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $85,500 in taxable income? O Government's tax revenues would decrease by $1425 O Government's tax revenues would increase by $1425 O Government's tax revenues would decrease by $1675 O Government's tax revenues would increase by $1675 O Government's tax revenues would remain unchanged b. What is the term that describes this type of reaction to a tax rate increase? O Budget constraint O Endowment effect O Price effect O Income effect O Substitution effect c. What types of taxpayers are likely to respond in this manner? O Taxpayers with more disposable income O Taxpayers with less disposable income