If a Reduction in Taxes on Savings Reduced the Amount

question 61

Multiple Choice

If a reduction in taxes on savings reduced the amount of saving,then the

• A) income effect equaled the substitution effect.
• B) income effect outweighed the substitution effect.
• C) the substitution effect outweighed the income effect.
• D) None of the above.

---

Definitions:

Misinformation Effect

A memory distortion phenomenon where post-event information alters a person’s recollection of the original event.

First Impressions

The initial perceptions or judgments formed about someone or something at the first encounter.

Memory

The cognitive process involving the encoding, storing, and retrieving of information over time.

Encoding

The method of transforming data into a format that can be retained in memory storage.