Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions :
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, 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