A policy that offers parents a tax reduction based on how much they are saving for their children's college education should ________ the equilibrium level of loanable funds and ________ the rate of long-term growth.
A)decrease; increase
B)increase; decrease
C)decrease; decrease
D)increase; increase

Question

Quizplus · Accepted Answer

This policy encourages savings for education, which increases the supply of loanable funds, lowering interest rates and facilitating more investments, including in human capital, thus potentially increasing the rate of long-term growth.

A Policy That Offers Parents a Tax Reduction Based on How