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

question 50

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. In theory, and all else remaining equal, what do we expect the effect of such a policy to be on the market for financial capital?

• A) There will be no effect on the market for financial capital.
• B) The investment demand curve shifts right, the equilibrium interest rate rises and investment rises.
• C) The supply of savings curve shifts right, the equilibrium interest rate falls and investment increases.
• D) The supply of saving curve shifts left, the equilibrium interest rate rises and investment decreases.
• E) The investment demand curve shifts left, the equilibrium interest rate falls and investment falls.

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