If a reform of the tax laws encourages greater saving, the result would be
A) higher interest rates and greater investment.
B) higher interest rates and less investment.
C) lower interest rates and greater investment.
D) lower interest rate and less investment.

Question

Quizplus · Accepted Answer

If tax laws encourage greater saving, the supply of loanable funds increases, leading to lower interest rates, which in turn encourages greater investment.

If a Reform of the Tax Laws Encourages Greater Saving