Multiple Choice QuestionWhich of the following describes the effect on the supply of loanable funds if interest earned on savings were to be suddenly exempted from taxes?Multiple choice question.The supply of loanable funds would decrease and shift to the rightThe supply of loanable funds would increase and shift to the rightThe supply of loanable funds would increase and shift to the leftThe supply of loanable funds would decrease and shift to the left
Question
Multiple Choice QuestionWhich of the following describes the effect on the supply of loanable funds if interest earned on savings were to be suddenly exempted from taxes?Multiple choice question.The supply of loanable funds would decrease and shift to the rightThe supply of loanable funds would increase and shift to the rightThe supply of loanable funds would increase and shift to the leftThe supply of loanable funds would decrease and shift to the left
Solution
The correct answer is: The supply of loanable funds would increase and shift to the right.
Here's why:
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If interest earned on savings were to be suddenly exempted from taxes, it would make saving money more attractive because people would get to keep more of their interest earnings.
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This would incentivize more people to save their money rather than spend it.
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As more people save, the supply of loanable funds (money that is available for banks to loan out) would increase.
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In terms of the supply and demand graph, an increase in supply causes the supply curve to shift to the right.
So, the supply of loanable funds would increase and shift to the right.
Similar Questions
Multiple Choice QuestionWhich of the following would cause the supply of loanable funds to shift to the left?Multiple choice question.Anything that causes a decline in savingsA decrease in a nation's incomeA decline in household spending on consumer goodsAnything that causes households to save more
Multiple Choice QuestionWhich of the following would result in a rightward shift of the supply curve for loanable funds?Multiple choice question.An increase in tastes and preferences for moneyAnything that causes households to increase savingsA decrease in tastes and preferences for moneyAnything that causes a decline in household savings
Multiple Choice QuestionWhich of the following describes how the supply curve of loanable funds would be affected if the government expanded programs to cover medical costs more fully?Multiple choice question.The supply of loanable funds would decrease and shift to the rightThe supply of loanable funds would increase and shift to the rightThe supply of loanable funds would decrease and shift to the leftThe supply of loanable funds would increase and shift to the left
Multiple Choice QuestionWhich factor would increase the demand for loanable funds?Multiple choice question.Anything that increases the rate of return on potential investmentsAnything that would cause households to be thriftierAnything that would cause households to be less thriftyAnything that decreases the rate of return on potential investments
Multiple Choice QuestionWhich of the following best explains how banks attract loanable funds?Multiple choice question.By deferring household consumptionBy paying interest to saversBy supplying capital to businessesBy charging interest on loaned funds
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