Exhibit: Saving, Investment, and the Interest Rate 2 the Economy

Multiple Choice

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