Jacques receives a portion of his income from his holdings of interest-bearing u.s. government bonds. the bonds offer a real interest rate of 2.5% per year. the nominal interest rate on the bonds adjust 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 2.5% per year, find the nominal interest rate on Jacques's bonds, the after-tax nominal interest rate, and the after-tax real 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) 2.0 7.5 2.5 Compared with higher inflation rates, a lower inflation rate will the after-tax real interest rate when the government taxes nominal interest income. This tends to saving, thereby the quantity of investment in the economy and the economy's long-run growth rate