Figure 26-2

-Refer to Figure 26-2.Which of the graphs in the figure above shows the effects of an increase in the tax rate on interest income?

Question

Figure 26-2
 
-Refer to Figure 26-2.Which of the graphs in the figure above shows the effects of an increase in the tax rate on interest income?

Quizplus · Accepted Answer

An increase in the tax rate on interest income will reduce the after-tax return on savings, which will lead to a decrease in the quantity of savings supplied. This is shown in graph 1, where the supply curve shifts to the left after the tax rate increase.

Figure 26-2 -Refer to Figure 26-2.Which of the Graphs in the Figure