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If Congress passes a law such that short term Treasury bonds are exempt from income tax (that is, they are not taxed) then, all else
If Congress passes a law such that short term Treasury bonds are exempt from income tax (that is, they are not taxed) then, all else equal, one would expect Interest rates at every maturity to fall O The term structure to become steeper (greater slope) O The term structure to become flatter (less slope) Interest rates at every maturity to rise
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