interest rates, which leads to v investment and economic growth. A tax law change that successfully encourages saving will To understand better how changes in tax laws can affect saving, imagine that Tim, a student, plans to save $450 from his summer job to buy textbooks next autumn. Tim's parents are so impressed with his plans that they offer to pay him an additional 40% interest per month on the money he saves, which means that Tim is now earning a large rate of return on his saving. It turns out that Tim saves $500 (before the interest paid by his effect for Tim in this case. parents) from his summer job. This means that the v'effect must be bigger than the
interest rates, which leads to v investment and economic growth. A tax law change that successfully encourages saving will To understand better how changes in tax laws can affect saving, imagine that Tim, a student, plans to save $450 from his summer job to buy textbooks next autumn. Tim's parents are so impressed with his plans that they offer to pay him an additional 40% interest per month on the money he saves, which means that Tim is now earning a large rate of return on his saving. It turns out that Tim saves $500 (before the interest paid by his effect for Tim in this case. parents) from his summer job. This means that the v'effect must be bigger than the
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:LOANABLE FUNDS
interest rates, which leads to
investment and economic growth.
A tax law change that successfully encourages saving will
To understand better how changes in tax laws can affect saving, imagine that Tim, a student, plans to save $450 from his summer job to buy
textbooks next autumn. Tim's parents are so impressed with his plans that they offer to pay him an additional 40% interest per month on the money
he saves, which means that Tim is now earning a large rate of return on his saving. It turns out that Tim saves $500 (before the interest paid by his
effect for Tim in this case.
parents) from his summer job. This means that the
effect must be bigger than the
INTEREST RATE
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