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Suppose the government passes a law that significantly increases the tax rate on interest earned from savings and it passes another law that increases the
Suppose the government passes a law that significantly increases the tax rate on interest earned from savings and it passes another law that increases the tax rate on corporate profit causing firms to reduce investment, then these legislations are likely to all else constant). increase the quantity of loanable funds borrowed and saved for sure, but it is unclear how the interest rate will be affected, reduce both the interest rate and the quantity of loanable funds borrowed and saved. O increase the interest rate but decrease the quantity of loanable funds borrowed and saved. O reduce the quantity of loanable funds borrowed and saved for sure, but the effect on interest rate is unclear
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