What would be the effect on the loanable funds market of an increase in the corporate profits tax? (Assume that the government maintains a balanced budget. )
A) The demand for funds would decrease,lowering the interest rate and leading to lower private investment.
B) The demand for funds would increase,raising the interest rate and leading to higher private investment.
C) Both the demand and the supply of funds would increase,lowering the interest rate and leading to lower private investment.
D) The supply of funds would increase,lowering the interest rate and leading to higher private investment.
E) The supply of funds would decrease,raising the interest rate and leading to lower private investment.
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