Suppose a Country Has a Consumption Tax That Is Similar

question 79

Multiple Choice

Suppose a country has a consumption tax that is similar to a state sales tax.If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings,what would happen?

• A)There would be no change in the interest rate or saving.
• B)The interest rate would decrease and saving would increase.
• C)The interest rate would increase and saving would decrease.
• D)None of the above is correct.