The Canadian Government Introduced the Tax- Free Savings Account (TFSA)in

question 8

Multiple Choice

The Canadian government introduced the Tax- Free Savings Account (TFSA) in 2009,which allows Canadians to earn tax- free investment returns on a limited amount of savings each year.One objective is to increase the total supply of saving in the economy.Why might a policy such as this not have the desired effect on the economy?

• A)The supply of saving will increase only in response to a decrease in the interest rate.
• B)The introduction of TFSAs will divert financial capital away from saving and toward investment.
• C)The supply of saving will increase only in response to an increase in the pre- tax interest rate.
• D)The supply of savings in general can increase only by income growth or population growth.
• E)The funds deposited to a TFSA could simply be substituted from other saving that would happen anyway.

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