A consumption tax would lead to an increase in the supply of loanable funds and a decrease in real interest rates.

Name: A consumption tax would lead to an increase in the supply of loanable funds and a decrease in real interest rates.
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Question

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A consumption tax would discourage consumption and encourage saving, leading to an increase in the supply of loanable funds. With more funds available to lend, the competition among borrowers would decrease, resulting in a decrease in real interest rates.

A Consumption Tax Would Lead to an Increase in the Supply