Multiple Choice
A reduction in the tax rate on interest income
A) raises the amount earned on savings. Saving will rise if the income effect of the reduction in the tax rate is larger than the substitution effect.
B) raises the amount earned on savings. Saving will rise if the income effect of the reduction in the tax rate is smaller than the substitution effect.
C) reduces the amount earned on savings. Saving will rise if the income effect of the reduction in the tax rate is larger than the substitution effect.
D) reduces the amount earned on savings. Saving will rise if the income effect of the reduction in the tax rate is smaller than the substitution effect.
Correct Answer:
Verified
Correct Answer:
Verified
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