Everything else held constant,a decrease 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

A decrease in marginal tax rates makes the tax-exempt status of municipal bonds less attractive, reducing their demand, while increasing the attractiveness of taxable U.S. government bonds, thus increasing their demand.

Everything Else Held Constant,a Decrease in Marginal Tax Rates Would