6. Suppose the government creates a savings dis-incentive, such as a tax on savings. a. Show...

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Question

6. Suppose the government creates a savings dis-incentive, such as a tax on savings. a. Show...

6. Suppose the government creates a savings dis-incentive, such as a tax on savings.

a. Show how the market for loanable funds is affected in a (well-labeled) graph

b. Explain how the equilibrium “price” and quantity have changed in this market

business economics

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Answer 1

Answer #1

A savings disincentive decreases savings and thereby reducing the supply of loanable funds. The effect of the shift of supply of loanable funds is shown in the below image.

A Sawing disimcenive Pacalu caunes people to save tess of thein imcome Loan alble Loanalble fund Dente ot intepest e quitilomium i2 old equililbwium loanabte This shift of toanatle trish s ppty me cam te L2 an te 1 乙

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Answer 2

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