Question

Suppose the current market rate of interest is 8 percent. John is subject to a 31 percent marginal tax rate on his interest income. What is John's equilibrium marginal rate of time preference? Suppose the marginal tax rate John is subject to decreases to 20 percent.
Can you predict the effect of the decrease in marginal tax rates on John's current saving?


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  • CreatedAugust 22, 2015
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