Question

Which of the following would directly lead to the quantity of loanable funds in the market for loanable funds falling?

a. Social security is ended, leaving individuals on the hook for paying all their costs during retirement.

b. A war breaks out which galvanizes individuals to buy war bonds (bonds that fund the government's military spending).

c. A new tax is introduced that taxes all types of savings (bonds, stocks, cds, mutual funds, etc.) by taking 50% of all interest gained.

d. An ad campaign by the government to encourage companies to invest in new, more efficient, technology.

Answer 1

Answer - Option C

A new tax is introduced that taxes all type of savings , by taking 50 % of all interest gained.

This will reduce the supply of funds in the market leading to leftward shift in the supply curve. This will reduce the quantity of funds in the market.

The other options will increase or not change the equilibrium funds. Hence Option C will be correct