Assuming That the Substitution Effect Is Large Relative to the Income

Multiple Choice

Assuming that the substitution effect is large relative to the income effect,tax reform designed to increase saving

A) increases the interest rate and decreases spending on capital goods.
B) increases the interest rate and increases spending on capital goods.
C) decreases the interest rate and increases spending on capital goods.
D) decreases the interest rate and decreases spending on capital goods.