Question

In certain economy pple save part income in financial sector and use remaining part for consumption the govt decides to increse tax rates for evryone in that economy what effects will the tax increase have on savings and invwestment in the economy

Answer 1

Answer: Savings decrease, and investment decreases

Explanation:

A tax is referred to as a levy which is imposed on the people in a particular country so that the government can generate revenue.

When there's an increase in the tax rate, it simply means that the government wants to generate more money. This will have an effect on the consumption, savings and investment of the individuals in the economy as their savings will be reduced, consumption reduces and investment reduces as well.