Suppose a Country Has Only a Sales Tax

Multiple Choice

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

A) interest rates and the equilibrium quantity of loanable funds rise.
B) interest rates rise and the equilibrium quantity of loanable funds fall.
C) interest rates fall and the equilibrium quantity of loanable funds rise.
D) interest rates and the equilibrium quantity of loanable funds fall.