Recently, There Has Been Talk About Reforming the Tax System

Multiple Choice

Recently, there has been talk about reforming the tax system. Some advocate replacing the current income tax with a consumption tax. The income tax taxes interest earned on savings directly, while a consumption tax doesn't. The most likely effect on savings, if there is a shift to the consumption tax, would be to

A) raise interest rates
B) shift the supply curve of loanable funds to the left
C) encourage higher consumption
D) shift the supply curve of loanable funds to the right
E) discourage savings