The Country of Veridian Has a Tax System Identical to That

question 1

Multiple Choice

The country of Veridian has a tax system identical to that of the United States.Suppose someone in Veridian bought a parcel of land for 10,000 deera (the local currency) in 1964 when the price index equaled 100.In 2005,the person sold the land for 100,000 deera,and the price index equaled 500.The tax rate on nominal capital gains was 20 percent.Compute the taxes the person paid on the nominal gain and the change in the real value of the land in terms of 2005 prices to find the after-tax real rate of capital gain.

• A) -20 percent
• B) 20 percent
• C) 42 percent
• D) 64 percent

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Definitions:

Labor Supply

The total hours that workers are willing to work at a given wage rate, influenced by various factors like salaries, working conditions, and demographics.

Excess Burden

Excess burden is the economic loss society incurs as a result of tax inefficiencies, beyond the tax itself, often due to distorted economic behaviors.

Economic Decisions

Choices made by individuals, households, or governments regarding allocation of resources and distribution of goods and services.

Excess Burden

The cost to society created by market inefficiency, which can occur through such things as government intervention in the market or taxes that distort market outcomes.