Question

Earned income and capital gains (or "portfolio income") are acquired in different ways. Which statement describes how they are different? a. Earned income and capital gains are both based on the number of hours you work. b. Earned income is payment for employment, while capital gains are produced by your investments. c. Capital gains are received if you manage the company, but earned income is received if you are an employee of the company. d. Earned income is when you make the investment directly, but capital gains are when someone else has managed your investments.

Answer 1

Answer: b. Earned income is payment for employment, while capital gains are produced by your investments.

Explanation: Earned income is the income received from working or engaging in a particular activity and an income generated from the day to day activity. For example, earned income is the income generated from employment. While on the other hand capital gain is the income received from the income generated from a one time sale of an asset or an item. For example, selling a car and generating a profit of $1500, $1500 is the capital gain.

Hence, Earned income is the payment for employment while capital gains are produced by your investments.

Answer 2

The answer is B. I just had this question on Edgenunity.