If the government lowered the capital gains tax, what would be the effect in the loanable funds market? (Assume the government does not run a budget deficit.)

a. Both the supply and demand for funds would increase, lowering the interest rate and raising investment spending.
b. The supply of funds would decrease, raising the interest rate and lowering investment spending.
c. The supply of funds would decrease, lowering both the interest rate and investment spending.
d. The supply of funds would increase, lowering both the interest rate and investment spending.
e. The supply of funds would increase, lowering the interest rate and raising investment spending.


E

Economics

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