Exam 17: Money Growth and Inflation: The Costs of Inflation

Serena purchased 10 shares of GLC,Inc.stock for $200 per share;one year later she sold the 10 shares for $220 a share.Over the year,the price level increased from 135.0 to 143.1.The tax rate on capital gains is 50 percent.If the capital gains tax is on nominal gains,how much tax does Serena pay on her gain?

In the U.S. ,taxes on capital gains are computed using

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Steve purchases some land for $30,000.He maintains it,but makes no improvements to it.One year later he sells it for $32,000.Stephanie puts $30,000 in a savings account that pays 6% interest.Steve has to pay the 50% capital gains tax,Stephanie is in the 35% tax bracket.The inflation rate was 2%.Who had the higher before-tax real gain and who had the higher after-tax real gain?

Between 1880 and 1886,prices that were

Studies have found which of the following economic terms mentioned most often in U.S.newspapers?

If people had been expecting prices to rise but in fact prices fell,then who among the following would benefit?

Given a nominal interest rate of 6 percent,in which of the following cases would you earn the highest after-tax real rate of interest?

When inflation rises,people will desire to hold

Given a nominal interest rate of 8 percent,in which of the following cases would you earn the highest after-tax real interest rate?

Wealth is redistributed from debtors to creditors when inflation was expected to be

The costs of changing price tags and price listings are known as

Indexing the tax system to take into account the effects of inflation would by itself

Wealth is redistributed from debtors to creditors when inflation is

Suppose that in some tax year you earned a nominal interest rate of 6 percent.During the time you held these funds inflation was 1 percent.You compute that you made a real after-tax interest rate of 3 percent.What was your tax rate?

Which of the following statements about inflation is correct?

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be.The real interest rate she earns is

Norma receives an increase in her nominal income.She complains that the current inflation rate of six percent erodes the real purchasing power of her additional nominal income.This is true

During the last tax year you lent money at a nominal rate of 6 percent.Actual inflation was 1.5 percent,but people had been expecting 1 percent .This difference between actual and expected inflation

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