If Parliament reduced the tax rate on interest income, what would most likely happen to investment and saving?
A) Investment would increase, and saving would decrease.
B) Investment would decrease, and saving would increase.
C) Investment and saving would both increase.
D) Investment and saving would both decrease.

Question

Quizplus · Accepted Answer

Reducing the tax rate on interest income makes saving more attractive because the after-tax return on savings would increase. This could lead to more saving. Additionally, as people save more, there is more capital available for investment, potentially lowering the cost of borrowing and encouraging more investment.

If Parliament Reduced the Tax Rate on Interest Income, What