Suppose the IRS were to introduce a tax exemption for portion of interest income earned on corporate bonds.This would

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Introducing a tax exemption for portion of interest income earned on corporate bonds would reduce the user cost of capital, as it would lower the tax burden on bond investors and make it cheaper for firms to raise funds through bond issuance. This, in turn, would increase the supply of capital, raise investment and potentially stimulate economic growth. However, it would not directly affect the marginal product of capital or the rate of depreciation.

Suppose the IRS Were to Introduce a Tax Exemption for Portion