A Decrease in the Tax Rate Is More Likely to Increase

A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is

A) small and an increase in private saving tends to have a small impact on the capital stock.
B) small and an increase in private saving tends to have a large impact on the capital stock.
C) large and an increase in private saving tends to have a small impact on the capital stock.
D) large and an increase in private saving tends to have a large impact on the capital stock.

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