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Kevin recelves 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

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Kevin recelves 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 20%. The following table shows two scenarios: a low-infiation scenario and a highinflation scenario, Given the real interest rate of 4.5% per year, find the nominal interest rate on Kevin's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. 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 saving, thereby the quantity of Investment in the economy and the econorny's long-run growth rate

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