What would happen in the market for loanable funds if the government were to decrease the tax on interest income?

In economics, saving is the act of setting aside money for future use, while investment is the act of capital formation. Savings can be done directly or indirectly, while investments can be direct or indirect. Direct investments include buying art, while indirect investments include putting money in a bank, credit union, or insurance company.  Savings are generally low-risk, meaning your money is safe, but the interest rates received are also low. Investments are a method of setting aside money for the future that takes on a higher risk than the traditional savings account. Investments... Show more

In economics, saving is the act of setting aside money for future use, while investment is the act of capital formation. Savings can be done directly or indirectly, while investments can be direct or indirect. Direct investments include buying art, while indirect investments include putting money in a bank, credit union, or insurance company. 

Savings are generally low-risk, meaning your money is safe, but the interest rates received are also low. Investments are a method of setting aside money for the future that takes on a higher risk than the traditional savings account. Investments usually are selected to achieve long-term goals. 
The financial system refers to a set of complex and closely linked institutions, markets, products, services, practices, and transactions that provides the network for generating, distributing, and spending financial wealth. The financial system consists of the group of institutions in the economy that help to match one person's saving with another person's investment. It moves the economy's scarce resources from savers to borrowers. 
Financial institutions act as a mediator between investors and borrowers. They can convert short-term liabilities into long-term investments and risky investments into risk-free investments.

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