Answer to Question #209611 in Finance for Syed Eassa

Question #209611

Consider savers are taxed on their nominal income, and explain what happens to the demand curves in the loan market as inflation rises? Draw diagram to explain it..


1
Expert's answer
2021-06-23T09:39:32-0400

If savers are taxed on their nominal income, then the supply of loanable fund will fall as inflation rises. As a result the supply of loanable fund will shift to the left as S2 which will increase Interest rate from r1 to r2.


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