Holding other factors constant, if a change in tax laws discourages people from saving more for retirement, then the real interest rate will ________ and the equilibrium quantity of saving and investment will ________.
A)increase; increase
B)increase; decrease
C)decrease; decrease
D)decrease; increase

Question

Quizplus · Accepted Answer

When people save less for retirement, the supply of savings shift left and real interest rate increases while the quantity of national saving and investment decrease.

Holding Other Factors Constant, If a Change in Tax Laws