Question

13.Inflation sometimes causes people to pay ________ capital gains tax than they ought to, ________.
1.less; because inflation creates the opportunity for a tax write-off
2.more; because the inflation adjustments in tax laws overcompensate for inflation
3.more; if they neglect to claim the inflation adjustment that tax laws allow
4.more; if much of their calculated profits from selling assets was due to inflation
5.less; because tax laws do not typically account for inflation

15.Wanda owns a store and has not had to raise prices recently—and now her store has more customers. Which statement is correct?
1.This can be troublesome because she faces a future price uncertainty problem because she doesn’t know how much to increase her prices now or in the future.
2.This can be troublesome because she faces a price confusion problem: she doesn’t know if the extra business means that she should open another store, or if the crowds are a result of inflation, which has caused all consumers to buy at a faster rate.
3.It can’t be troublesome; it can only be good.
4.This can be troublesome because she faces a “menu costs” problem because she must not have increased prices fast enough.
5.This can be troublesome because too many customers generate deflationary pressures for all businesses.

Answer 1

13. Option 4.

• Inflation sometimes causes people to pay more capital gains tax than they ought to if much of their calculated profits from selling assets was due to inflation.
• Inflation is an economic situation of the rise in the general price level in the economy.
• As a result of inflation, people usually pay more taxes if the capital gains realised from the selling of their asset's are much lower and they are forced to sell their asset's for a lower value than the price at which they purchased those asset's.
• This is mainly because, during inflation the value of money remains the same while the prices rise rapidly.

15. Option 2.

• Wanda has an increase business in her store even though she did not raise the prices of her goods recently. This created price confusion problem as she was unsure whether the increase in the business in her store was due to inflation or not.
• This was troublesome for her as she can open a new store with the extra profits earned if the rise in profit was not due to inflation. But if it was due to inflation then she cannot open a new store as it can bring in losses for her because inflation can affect her store's profit.