Question

In the U.S., people are required to pay taxes on a. nominal interest earnings, irrespective of their real interest earnings. b. real interest earnings, irrespective of their nominal interest earnings. c. real capital gains, irrespective of their nominal capital gains. d. All of the above are correct.

Answer 1

a. nominal interest earnings, irrespective of their real interest earnings.

Step-by-step explanation:

Nominal interest is a sum total of the expected inflation rate as well as the real interest rate. This the interest which we pay on a loan. The nominal interest tells us how quickly the dollars rises. While the actual worth of the money is called the real interest. The people of the United States pays their taxes based on the nominal interest earnings which is not dependent on the real interest earnings.

Hence the correct option is (a).