Туа System to that of the United States. Suppose someone in Robinya bought a parcel of land for 10,000 deera (the local currency) in 1970 when the price index equaled 100. In 2010, the person sold the land for 100,000 deera, and the price index equaled 500. The tax rate on nominal capital gains was 20 percent. Compute the taxes the person paid on the nominal gain and the change in the real value of the land in terms of 2010 prices to find the after-tax real rate of capital gain.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Economics
The country of Robinya has a tax system identical
to that of the United States. Suppose someone in
Robinya bought a parcel of land for 10,000 deera
(the local currency) in 1970 when the price index
equaled 100. In 2010, the person sold the land for
100,000 deera, and the price index equaled 500.
The tax rate on nominal capital gains was 20
percent. Compute the taxes the person paid on
the nominal gain and the change in the real value
of the land in terms of 2010 prices to find the
after-tax real rate of capital gain.
Transcribed Image Text:Economics The country of Robinya has a tax system identical to that of the United States. Suppose someone in Robinya bought a parcel of land for 10,000 deera (the local currency) in 1970 when the price index equaled 100. In 2010, the person sold the land for 100,000 deera, and the price index equaled 500. The tax rate on nominal capital gains was 20 percent. Compute the taxes the person paid on the nominal gain and the change in the real value of the land in terms of 2010 prices to find the after-tax real rate of capital gain.
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