Holding all other factors constant,an increase in the tax rate on revenue generated by capital will

Question

Quizplus · Accepted Answer

An increase in the tax rate on revenue generated by capital will decrease the incentive to invest, thereby decreasing investment. This will lead to a decrease in national saving as well since investment is a component of national saving. It is possible that such a tax increase may lead to an increase in private saving by those who are impacted by the tax but this effect will likely be smaller than the decrease in investment and national saving.

Holding All Other Factors Constant,an Increase in the Tax Rate