A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is
a. small and an increase in private saving tends to have a small impact on the capital stock.
b. small and an increase in private saving tends to have a large impact on the capital stock.
c. large and an increase in private saving tends to have a small impact on the capital stock.
d. large and an increase in private saving tends to have a large impact on the capital stock.
b
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