teelFailredmay
contestada

. in a certain economy, people save some part of their income in the financial sector and use the remaining part for consumption. The government decides to increase the tax rates for everyone in that economy. What effect will the tax increase have on savings and investment in the economy?
Savings decrease, and investment decreases.
Savings increase, and investment increases.
Savings increase, and investment decreases.
Savings decrease, and investment increases.

Respuesta :

lr1265
Savings decrease and investments decrease when taxes are raised because they have to ultimately pay more to taxes and have less money to save and/or invest.
saadhussain514

Answer:

Savings decrease, and investment decreases.

Explanation:

A government normally increases taxes to boost it's tax revenue but this also results in the decrease of savings and investments. Higher taxes leaves consumers with less disposable income which then discourages them from saving and investing.