What Is the Effect of an Increase in the Tax

question 22

Multiple Choice

What is the effect of an increase in the tax rate on interest income on the supply of and the demand for loanable funds?

• A) The supply curve shifts to the left, while the demand curve remains unchanged.
• B) The supply curve shifts to the right, while the demand curve remains unchanged.
• C) The supply curve remains unchanged, while the demand curve shifts to the left.
• D) The supply curve remains unchanged, while the demand curve shifts to the right.

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Definitions:

Semi-Strong Form Efficient

This term describes a market hypothesis where all public information is already reflected in stock prices, implying that analyzing financial statements or recent news would not give an investor any advantage.

Publicly Available Information

Information that is accessible to the general public, often regarding companies, market conditions, or financial data.

Mispriced Stocks

Stocks whose market prices do not accurately reflect their intrinsic value due to various factors such as information asymmetry.

Strong-Form Efficient

A market hypothesis that assumes all information, both public and private, is completely factored into stock prices at all times, making it impossible to consistently achieve higher returns.