Suppose a Country Has a Consumption Tax That Is Similar

question 90

Multiple Choice

Suppose a country has a consumption tax that is similar to a provincial sales tax. If its government eliminates the consumption tax and replaces it with an income tax that includes an income tax on interest from savings, what would most likely happen?

• A) Both the interest rate and saving would decrease.
• B) The interest rate would decrease, and saving would increase.
• C) The interest rate would increase, and saving would decrease.
• D) Both the interest rate and saving would increase.

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Definitions:

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A regulatory or decision-making approach that relies strictly on written rules, standards, and procedures.

Loopholes

Provisions in laws or regulations that allow individuals or companies to avoid abiding by the spirit of the law in a legal way.

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