Question

An increase in taxes on interest income ________ supply of loanable funds curve and ________ the demand for loanable funds curve.

A) shifts; does not shift
B) does not shift; shifts
C) does not shift; does not shift
D) shifts; shifts

Answer 1

1 i am shifting 2 i am shifting 3 i am shifting 4 i- *goes on until i feel like i am floating*

Step-by-step explanation:

Answer 2

A

Step-by-step explanation:

An increase in taxes on income from loans would mean that the cost of lending has gone up for the people who are willing to lend. This in turn reduces the profits from lending and thus lenders consider other more profitable opportunities to invest.

This reduces the amount available for lending as it is now more costly. This thus shifts the supply of loanable funds curve to the left, hence reducing the amount available for lending at any given interest rate.

As for the demand of funds, it is reduced following the shifted equilibrium but it does not shift.

Hope that helps.