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Suppose that the Fisher hypothesis holds for an economy that has an expected real interest rate r of 4%. For each of the expected inflation
Suppose that the Fisher hypothesis holds for an economy that has an expected real interest rate r of 4%. For each of the expected inflation rates e of 6, 8, and 10%, calculate the nominal interest rate i and the after-tax expected real interest rate ia if a tax rate t of 30% is imposed on the nominal interest rates. Discuss the possible societal effects of taxes on nominal interest rates.
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