If income tax rates were lowered, then ________.
A) the interest rate on tax-exempt bonds would rise
B) the interest rate on U.S. Treasury bonds would rise
C) the interest rate on tax-exempt bonds would fall
D) the interest rate on tax-exempt bonds would stay the same

Question

Quizplus · Accepted Answer

Lowering income tax rates makes tax-exempt bonds less attractive compared to taxable bonds, leading to a decrease in demand for tax-exempt bonds and causing their interest rates to rise.

If Income Tax Rates Were Lowered, Then ________