Of the following,the most likely effect of an increase in income tax rates would be to
A)decrease the savings rate.
B)decrease the supply of loanable funds.
C)increase interest rates.
D)all of these choices are correct.

Question

Quizplus · Accepted Answer

When income tax rates increase, people have less disposable income which reduces their ability to save. This results in a decrease in the savings rate (Choice A). With less savings available, the supply of loanable funds decreases as well (Choice B). A decrease in the supply of loanable funds leads to an increase in interest rates (Choice C). Therefore, all the given choices are correct.

Of the Following,the Most Likely Effect of an Increase in Income