You Bought Some Shares of Stock And, Over the Next

question 184

Multiple Choice

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced

• A)both a nominal gain and a real gain, and you paid taxes on the nominal gain.
• B)both a nominal gain and a real gain, and you paid taxes only on the real gain.
• C)a nominal gain, but no real gain, and you paid taxes on the nominal gain.
• D)a nominal gain, but no real gain, and you paid no taxes on the transaction.

Understand how to calculate annualized rates of return.

Comprehend the impact of inflation on purchasing power over time.

Apply compound interest formulas to solve real-world financial problems.

Calculate the time required for an investment to grow to a certain value under different compounding frequencies.

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Definitions:

Trade Surplus

A situation in which a country's exports exceed its imports, leading to a positive balance of trade.

Export

Goods or services sold by a country to another country, contributing positively to the selling country's balance of trade.

C + I + G Curve

An economic model representing the total spending in an economy, comprising Consumption (C), Investment (I), and Government Expenditures (G).

Regressive Tax

A taxation mechanism where the tax rate effectively decreases as the taxable amount (income or assets) increases, placing a higher relative burden on lower earners.