Why Does Inflation Increase Your Tax Burden, at Least in the Short

question 129

Multiple Choice

Why does inflation increase your tax burden, at least in the short run? I. Inflation bloats stock prices, which leads to a capital gains tax burden. II. The market value of financial assets rises with inflation and the U.S. tax system assesses taxes on such gains, even if the "real" value of such assets remains the same. III. Consumers pay higher sales taxes when the prices of goods and services increase due to inflation.

• A) I and II only
• B) II and III only
• C) I and III only
• D) I, II, and III

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Definitions:

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An individual with whom one maintains a prolonged romantic, sexual, or significant relational commitment.

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