If consumers face higher interest rates when their savings is positive than when their savings is negative,

Question

Quizplus · Accepted Answer

If consumers face higher interest rates when their savings are positive, they would be incentivized to spend more to avoid the higher costs of saving. This would lead to an increase in consumption and aggregate demand. As a result, cutting taxes may increase welfare by providing consumers with more disposable income to spend.

If Consumers Face Higher Interest Rates When Their Savings Is