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disa [49]
3 years ago
12

A year ago a country reduced the tax rate on all interest income from 20% to 10%. During the year private saving was $500 billio

n as compared to $400 billion the year before the tax reform. Taxes on interest income fell by $10 billion. Assuming no other changes in income, or government revenues or spending, which of the following is correct? a. the substitution effect was larger than the income effect; national saving rose b. the substitution effect was larger than the income effect; national saving fell c. the income effect was larger than the substitution effect; national saving rose d. the income effect was larger than the substitution effect; national saving fell
Business
1 answer:
pantera1 [17]3 years ago
6 0

Answer:

a. the substitution effect was larger than the income effect; national saving rose

Explanation:

In macroeconomics, the substitution effect means that as the return on savings increases, households will substitute current spending and will save more in order to be able to spend more in the future.

In this case, since interests from bonds, CDs, etc., are taxed at a much lower rate, the after tax return from investing on any of them increases. Households consider that the money that they can earn now by investing on them is more valuable than consuming goods or services immediately.

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Answer:

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Explanation:

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8 0
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Answer:

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Explanation:

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A rule that all employees in the organization (including the ceo) must fly coach when they travel on commercial airlines represe
Eva8 [605]
The word that completes the sentence is bureaucratic. bureaucratic control is one of the control systems that are defined as systems of rules that are devised and implemented that are applicable to global business and maybe unique to a specific business. it is an important tool for risk management as well. 
5 0
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Ferret boy names NO HUMAN NAMES (chase, rick, bob, george, etc)
DaniilM [7]

Answer:

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Explanation:

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Answer:

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