Exhibit: Saving, Investment, and the Interest Rate 2

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, r , at which saving, S , equals desired investment, I . 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