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Suppose that a typical taxpayer has a marginal personal income tax rate of 40 %. The nominal interest rate is 15%, and the expected inflation
Suppose that a typical taxpayer has a marginal personal income tax rate of 40 %. The nominal interest rate is 15%, and the expected inflation rate is 5%. What is the real after-tax rate of interest? Suppose that the expected inflation rate increase by 4% points to 9%, and the nominal interest rate increases by the same amount. What happens to the real after-tax of return?
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