The higher inflation rate in year 2 reduced the incentive to save in Abudhabi. True or False?

The table below shows the nominal interest rate and the inflation rate for two different years in the economy of Abudhabi. In both years, the Abudhabian government taxed nominal interest income from saving at a rate of 30%.








Year 1


Nominal Interest Rate 7%


Inflation Rate 2%





Year 2


Nominal Interest Rate 12%


Inflation Rate 6%








*****The higher inflation rate in year 2 reduced the incentive to save in Abudhabi. True or False?The higher inflation rate in year 2 reduced the incentive to save in Abudhabi. True or False?
70% of 7% is 4.9% minus adjustment for inflation leaving a net gain of 2.9%





70% of 12% is 8.4% minus adjustment for inflation leaving a net gain of 2.4%





I would say TRUE.The higher inflation rate in year 2 reduced the incentive to save in Abudhabi. True or False?
False
tax on interst income=30%


real interst rate= nominal interst rate + inflation rate


year1


real interest rate=7+2= 9%


year 2


real interest rate=12+6=18%


therefore people have an incentive to saved more, specially that the tax is constant i'd say


FALSE