Assume the substitution effect is large in relation to the income effect, thus tax reform designed to increase saving a. increases the interest rate…

Assume the substitution effect is large in relation to the income effect, thus tax reform designed to increase saving

a. increases the interest rate and decreases spending on capital goods

b. increases the interest rate and increases spending on capital goods

c. decreases the interest rate and increases spending on capital goods

d. decreases the interest rate and decreases spending on capital goods

 
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