Suppose the tax rate on interest income from saving were reduced. a. The income effect, but not the substitution effect, would tend to reduce private saving. b. The substitution effect, but not the income effect, would tend to reduce private saving. c. Both the income and substitution effect would tend to reduce private saving. d. Neither the income nor the substitution effect would tend to reduce private saving.

Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and managers? a. change the corporation's formal documents to make it easier for outside investors to acquire a controlling interest in the firm through a hostile takeover. b. eliminate a requirement that members of the board of directors must hold a high percentage of their personal wealth in the firm's stock. c. for a firm that compensates managers with stock options, reduce the time before options are vested, i.e., the time before options can be exercised and the shares that are received can be sold. d. pay managers large cash salaries and give them no stock options. e. beef up the restrictive covenants in the firm's debt agreements.