Suppose the tax rate on interest income from saving were reduced.   a. The income effect, but not the substitution effect, would tend to reduce private saving.     b. The substitution effect, but not the income effect, would tend to reduce private saving.     c. Both the income and substitution effect would tend to reduce private saving.     d. Neither the income nor the substitution effect would tend to reduce private saving.

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Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.