What does the term "real return" refer to?

The term "real return" refers to the earnings generated from an investment after accounting for various costs and taxes, which accurately reflects the actual increase in purchasing power derived from the investment. This calculation provides a more comprehensive understanding of the investment's performance because it considers the expenses that can diminish overall gains. By focusing on earnings after costs and taxes, the real return offers a clearer picture of what an investor can retain and spend, as opposed to just the gross earnings or amounts before taxes.

In this context, other choices do not capture the nuances of real return. While the gross earnings refer to the total income generated, they do not consider the impact of costs or taxes. The total amount invested originally does not reflect returns at all; it's simply the principal amount. Lastly, earnings before tax excludes essential factors that affect the actual benefits received from the investment, making it less relevant when discussing real returns.