You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. 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, but no real gain, and you paid taxes on the nominal gain.
d. a nominal gain, but no real gain, and you paid no taxes on the transaction.
c
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Suppose the price level this year is 150 and the price level last year was 125. The inflation rate between last year and this year was
A) 20 percent. B) 2 percent. C) 16.6 percent. D) 1.6 percent.
Suppose the government spending multiplier is 2. The federal government cuts spending by $40 billion. What is the change in GDP if the price level is not held constant?
A) an increase of less than $80 billion B) an increase equal to $80 billion C) an increase of greater than $80 billion D) a decrease of less than $80 billion E) a decrease of more than $80 billion