A Reduction in the Tax Rate on Income from Saving

question 108

Multiple Choice

A reduction in the tax rate on income from saving would do which of the following?

• A) It would most directly benefit the poor in the short run.
• B) It would increase labour productivity over time.
• C) It would decrease the capital stock over time.
• D) It would decrease real wages over time.

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Definitions:

Competitive Equilibrium Price

The market price at which the quantity of an item supplied is equal to the quantity demanded, within a competitive marketplace.

Endowed

Provided with a quality, ability, or asset; in economics, it often refers to the resources or goods that an individual or institution possesses.

Pareto Optimal Allocation

An economic allocation where it is impossible to make any one individual better off without making at least one individual worse off.

Utility Function

A mathematical representation that assigns a level of utility or satisfaction to various combinations of goods and services consumed by an individual or society.