According to the definitions of private and public saving,if Y,C,and G remained the same,an increase in taxes would
A)raise both private and public saving.
B)raise private saving and lower public saving.
C)lower private saving and raise public saving.
D)lower private and public saving.

Question

Quizplus · Accepted Answer

An increase in taxes would lower disposable income, which would lower private saving (saving by households and firms). However, the increase in taxes would increase government revenue, which would raise public saving (saving by the government). Therefore, private saving would decrease and public saving would increase, resulting in a lowering of private saving and raising of public saving.

According to the Definitions of Private and Public Saving,if Y,C,and