You Bought Some Shares of Stock And, Over the Next

question 345

Multiple Choice

You bought some shares of stock and, over the next year, the price per share increased by 5 percent and the price level increased by 8 percent. 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 and a real loss, and you paid taxes on the nominal gain.
• D)a nominal gain and a real loss, and you paid no taxes on the transaction.

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Definitions:

Macroeconomy

The study of the performance, structure, and behavior of an economy as a whole, including total national income, GDP, and inflation rates.

Market System

A financial structure in which the choices about investment, production, and allocation are directed by the pricing cues generated by supply and demand dynamics.

Entrepreneurs

Individuals who innovate, create, and manage new businesses, taking on financial risks in the hope of profit.

Prudent Risk Management

The process of identifying, assessing, and prioritizing risks followed by coordinated application of resources to minimize, monitor, and control the probability or impact of unforeseen events.