An Increase in the Tax Rate on Interest Income

question 23

Multiple Choice

An increase in the tax rate on interest income

• A)raises the amount earned on savings.Saving will rise if the income effect of the increase in the tax rate is larger than the substitution effect.
• B)raises the amount earned on savings.Saving will rise if the income effect of the increase in the tax rate is smaller than the substitution effect.
• C)reduces the amount earned on savings.Saving will fall if the income effect of the increase in the tax rate is larger than the substitution effect.
• D)reduces the amount earned on savings.Saving will fall if the income effect of the increase in the tax rate is smaller than the substitution effect.

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Definitions:

Sample Mean

Sample mean refers to the average of all the data points in a sample taken from a population, serving as an estimate of the population mean.

Point Estimate

A single value that serves as the best guess or best estimate of a population parameter based on sample data.

Population Parameter

A numerical value that summarizes or describes an aspect of a population.

Point Estimate

A single value (or point) derived from a sample that best predicts or estimates an unknown population parameter.