Which of the following would most likely happen in the market for loanable funds

Question

Which of the following would most likely happen in the market for loanable funds if the government were to increase the tax on interest income? A.  Both interest rates and savings would fall. B.  Interest rates would rise and savings would fall. C.  Interest rates would fall and savings would rise. D.  Both interest rates and savings would rise. Which of the following would most likely happen in the market for loanable funds if the government were to increase the tax on interest income? A.  Both interest rates and savings would fall. B.  Interest rates would rise and savings would fall. C.  Interest rates would fall and savings would rise. D.  Both interest rates and savings would rise.

Explanation / Answer

Interest rates would rise and savings would fall.

because of low interest income after tax people will save less which will reduce supply of money resulting in higher interest rates

the above is answer..

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