What would happen in the market for loanable funds if the government were to decrease the tax on interest income?
A)the demand for loanable funds would increase
B)the demand for loanable funds would decrease
C)the supply of loanable funds would decrease
D)the supply of loanable funds would increase

Question

Quizplus · Accepted Answer

Decreasing the tax on interest income makes saving more attractive because savers get to keep more of their interest earnings. This increases the incentive for people to save, thereby increasing the supply of loanable funds in the market.

What Would Happen in the Market for Loanable Funds If