select the correct answer.\nin a certain economy, people save some part of their income in the financial…

select the correct answer.\nin 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?\na. savings decrease, and investment decreases.\nb. savings increase, and investment increases.\nc. savings increase, and investment decreases.\nd. savings decrease, and investment increases.

select the correct answer.\nin 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?\na. savings decrease, and investment decreases.\nb. savings increase, and investment increases.\nc. savings increase, and investment decreases.\nd. savings decrease, and investment increases.

Answer

Brief Explanations:

When the government increases tax rates, people have less disposable income. With less money available, they will save less. Since investment in an economy is often funded by savings (either directly through personal investment or indirectly through financial - sector intermediation), a decrease in savings will lead to a decrease in investment.

Answer:

A. Savings decrease, and investment decreases.