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To see how inflation raises the true tax rate on capital income, suppose the real interest rate is 2.00 percent a year, the tax rate

To see how inflation raises the true tax rate on capital income, suppose the real interest rate is

2.00 percent a year, the tax rate is 40.0 percent, and the inflation rate is 4.00 percent a year. What is the real after-tax interest rate? And what is the true tax rate?

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