Suppose that a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free.This would shift the

Question

Quizplus · Accepted Answer

When the first $5,000 of interest income becomes tax-free, savers are incentivized to save more, increasing the supply of loanable funds and causing interest rates to fall.

Suppose That a Government That Taxed All Interest Income Changed