Suppose a Country Has Only a Sales Tax

question 200

Multiple Choice

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

• A)interest rates and the equilibrium quantity of loanable funds rise.
• B)interest rates rise and the equilibrium quantity of loanable funds fall.
• C)interest rates fall and the equilibrium quantity of loanable funds rise.
• D)interest rates and the equilibrium quantity of loanable funds fall.

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Definitions:

Nondiscriminatory Reason

A justification for a particular decision or action that is not based on prejudice or bias related to race, color, religion, sex, or national origin.

Undue Hardship

An action requiring significant difficulty or expense by an employer to accommodate an employee's disability or religious practices.

Americans with Disabilities Act

A U.S. law enacted in 1990 that prohibits discrimination against individuals with disabilities in all areas of public life.

Physical Disability

A term that refers to a long-term or permanent impairment that significantly limits one or more major life activities.