Using the market for loanable funds, assuming MPC ≠ 1. Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer’s interest income was tax-free. Explain the economic outcome AND support your answer with a graph.

Using the market for loanable funds, assuming MPC ≠ 1. Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer’s interest income was tax-free. Explain the economic outcome AND support your answer with a graph.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter16: Interest, Rent, And Profit

Section: Chapter Questions

Problem 3QP

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