(Exhibit: Saving, Investment, and the Interest Rate 2) Reference

Multiple Choice

(Exhibit: Saving, Investment, and the Interest Rate 2) Reference: Ref 3-2 (Exhibit: Saving, Investment, and the Interest Rate 2) The economy begins in equilibrium at
Point E, representing the real interest rate, r₁ , at which saving, S₁ , equals desired
Investment, I₁ . What will be the new equilibrium combination of real interest rate, saving, and
Investment if there is a tax law change that makes investment projects less profitable and decreases the demand for investment goods (but does not change the amount of taxes collected in the economy) ?

A) Point A
B) Point B
C) Point C
D) Point D