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  3. suppose that a change in the expected inflation ra

Suppose that a change in the expected inflation rate leads supply and demand to adjust...

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Accounting

Suppose that a change in the expected inflation rate leads supply and demand to adjust so that the after-tax expected real interest rate is unchanged at 2.0 percent. The tax rate is 30 percent. Initially, the expected inflation rate is 3.0 percent. If the expected inflation rate falls from 6 percent to 0 percent, the nominal interest rate

Select one:

a. falls by 8.5 percent.

b. falls by 4.25 percent.

c. rises by 4.25 percent.

d. rises by 8.5 percent.

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