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Exhibit: Saving, Investment, and the Interest Rate 1 the Economy

Question 139

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Exhibit: Saving, Investment, and the Interest Rate 1 Exhibit: Saving, Investment, and the Interest Rate 1 The economy begins in equilibrium at point E, representing the real interest rate r<sub>1</sub> at which saving S<sub>1</sub> equals desired investment I<sub>1</sub>. What will be the new equilibrium combination of real interest rate, saving, and investment if the government cuts taxes, holding other factors constant? A) point A B) point B C) point C D) point D 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 the government cuts taxes, holding other factors constant?


A) point A
B) point B
C) point C
D) point D

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