In 2003, Congress passed a tax cut that included a reduction in the marginal tax rate on stock dividends. This essentially increased the after-tax rate of return on stocks that offer dividends
Using the loanable funds market, describe what will happen to saving, investment, economic growth, the real interest rate, and the quantity of loanable funds exchanged.
Dividends are the portion of corporate profits paid to shareholders. They are taxed like other forms of income. When taxes on dividends are decreased, this raises the after-tax rate of return on stocks that offer dividends. Because the return to saving would increase, saving will increase and the supply of loanable funds will increase. The shift to the right by the supply curve for loanable funds should lower the real interest rate and increase the quantity of loanable funds exchanged. This will raise investment spending in the economy. As investment spending grows, the capital stock and capital per hour worked should grow, and the rate of economic growth should increase.
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According to A.W. Phillips, an inverse relationship has existed between
A) the inflation rate and unemployment rate. B) the inflation rate and the money supply. C) unemployment and interest rates. D) the rate of growth of the money supply and the unemployment rate.
A bond's coupon payment divided by the bond's ________ is equal to the bond's current yield
A) current price B) interest rate C) face value D) principal
If Adam's Rib Joint took in $35,000 in revenue last week and had out-of-pocket expenses of $31,500:
a. it is clear that Adam made an economic profit of $3,500 b. Adam really didn't make any economic profit since he needs to put the difference between revenue and out-of-pocket expenses back into the firm. c. Adam clearly did not earn an economic profit. d. it is not clear whether Adam earned any economic profit last week because it depends on the magnitude of the implicit costs.
An increase in the government's budget deficit ________ the real interest rate and ________ the equilibrium quantity of national saving.
A. increases; decreases B. increases; increases C. decreases; decreases D. decreases; increases