If the supply of savings is perfectly inelastic, a comprehensive wealth tax will increase the market rate of interest.

Question

Quizplus · Accepted Answer

If the supply of savings is perfectly inelastic, it means the amount of savings does not change in response to changes in the interest rate. Therefore, a comprehensive wealth tax, which reduces the after-tax return on savings, would not affect the total amount of savings supplied and thus would not necessarily increase the market rate of interest.

If the Supply of Savings Is Perfectly Inelastic, a Comprehensive