Exhibit: Saving, Investment, and the Interest Rate 1

Multiple Choice

Exhibit: Saving, Investment, and the Interest Rate 1

Reference: Ref 3-1
 
(Exhibit: Saving, Investment, and the Interest Rate 1) The economy begins in equilibrium at Point E, representing the real interest rate, r , at which saving, S , equals desired investment, I . 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