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

A decrease in the tax rate of interest income would increase the supply of loanable funds, because they would now be more profitable, since the bondholders would now have to pay less taxes.

It would also increase demand, because interest income is a source of income for households and firms, and if they pay less tax on that income, they will have more overall income available, for both consumption and investment.

answer; break-even analysis;