Everything else held constant,an increase in marginal tax rates would likely have the effect of ________ the demand for municipal bonds,and ________ the demand for U.S. government bonds.
A)increasing;increasing
B)increasing;decreasing
C)decreasing;increasing
D)decreasing;decreasing

Question

Quizplus · Accepted Answer

An increase in marginal tax rates makes tax-exempt securities, such as municipal bonds, more attractive, thus increasing their demand. Conversely, the demand for taxable bonds, like U.S. government bonds, would decrease as investors seek to minimize their tax burden.

Everything Else Held Constant,an Increase in Marginal Tax Rates Would