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If Congress increased the tax rate on interest income, investment a. and saving would increase. b. would increase and saving would decrease. c. would decrease and saving would increase. d. and saving would decrease.

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Answer:

The correct answer is letter "D": and saving would decrease.

Explanation:

Increases in interest rates are not beneficial for economic growth. By paying more taxes companies' revenues are reduced discouraging entrepreneurs to go on new ventures. Besides, entities would be pushed to take measures such as lay-offs to compensate part of the losses due to paying more taxes. If unemployment increases the household savings tend to decrease.

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