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O d. Indexation of Social Security benefits to inflation QUESTION 59 A year ago a country reduced the tax rate on all interest income from
O d. Indexation of Social Security benefits to inflation QUESTION 59 A year ago a country reduced the tax rate on all interest income from 40% to 10%. During the year private saving was $600 billion as compared to $500 billion the year before the tax reform. Taxes collected on interest income fell by $150 billion. Assuming no other changes in government revenues or spending which of the following is correct? a. The substitution effect was larger than the income effect; national saving rose b. The substitution effect was larger than the income effect; national saving fell OOOO c. The income effect was larger than the substitution effect; national saving rose d. The income effect was larger than the substitution effect; national saving fell
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