If the government ceases to tax income earned on savings,other things equal,it is likely that interest rates would rise.

Question

Quizplus · Accepted Answer

If the government ceases to tax income earned on savings, it would likely increase the incentive for people to save more. This increase in savings would lead to a higher supply of loanable funds, which, other things being equal, would tend to lower interest rates, not raise them.

If the Government Ceases to Tax Income Earned on Savings,other