investment Attempts: 1.7 9. Problems and Applications 09 Investment can be incre

Question

investment Attempts: 1.7 9. Problems and Applications 09 Investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit. True or False: It is possible to implement both of these policies at the same time because reducing taxes on private spending has the Average: 1.7/2 decreasing the government budget deficit. O True False What would you need to know in order to judge which of these two policies would be a more effective way to rase investmenti Check all that apply The elastiaty of private saving with respect to the after-tax real interest rate The responsiveness of private saving to increases in investment The response of private saving to changes in the government budget deficit u

Explanation / Answer

9. False.

(investment can be increased either by reducing taxes on private saving or by reducing government deficit. Reducing taxes on private saving has the effect of increasing government deficit, and hence both the policies cannot be engaged at the same time).

The elasticity of private saving with respect to the after-tax real interest rate.

The response of private saving to changes in the government budget deficit.

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