A year ago a country reduced the tax rate on all interest income from 40% to 10%.During the year private saving was $600 billion as compared to $500 billion the year before the tax reform.Taxes collected on interest income fell by $150 billion.Assuming no other changes in government revenues or spending which of the following is correct?
A)the substitution effect was larger than the income effect;national saving rose
B)the substitution effect was larger than the income effect;national saving fell
C)the income effect was larger than the substitution effect;national saving rose
D)the income effect was larger than the substitution effect;national saving fell

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The Answer of A year ago a country reduced the tax rate on all interest income from 40% to 10%.During the year private saving was $600 billion as compared to $500 billion the year before the tax reform.Taxes collected on interest income fell by $150 billion.Assuming no other changes in government revenues or spending which of the following is correct?
A)the substitution effect was larger than the income effect;national saving rose
B)the substitution effect was larger than the income effect;national saving fell
C)the income effect was larger than the substitution effect;national saving rose
D)the income effect was larger than the substitution effect;national saving fell

A Year Ago a Country Reduced the Tax Rate on All