You bought some shares of stock and sell them one year later.At the end of the year,the price per share was 5 percent higher and the price level was 3 percent higher.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.

Question

Quizplus · Accepted Answer

The price per share increased by 5% over the year, which is the nominal gain. However, the price level also increased by 3%, which means that the real gain is only 2% (5% - 3%). Therefore, you experienced both a nominal gain and a real gain, and you will pay taxes on the nominal gain.

You Bought Some Shares of Stock and Sell Them One