A government policy that lets individuals put away money for retirement tax-free will

Question

Quizplus · Accepted Answer

A tax-free retirement savings policy would incentivize individuals to save more, thus increasing the supply of loanable funds available for investment. This would shift the supply curve of loanable funds to the right, leading to lower interest rates and increased investment without crowding out private investment. Therefore, choice C is correct. Choice A is incorrect because it refers to the effect of an increase in demand for loanable funds, rather than an increase in supply. Choice B is incorrect because it assumes that a government policy that increases savings would compete with private investment, when in fact they can coexist. Choice D is incorrect because the policy would have the opposite effect of inducing people to save more, not less.

A Government Policy That Lets Individuals Put Away Money for Retirement