FIGURE 15- 2 -Refer to Figure 15- 2. the Market for Financial Capital

FIGURE 15- 2
-Refer to Figure 15- 2. The market for financial capital is initially in equilibrium at point E1. If the government then institutes a policy that encourages individuals to increase their desired saving,

A) the flow of investment and saving both increase in the new equilibrium, but the interest rate is unaffected.
B) the flow of investment and saving both increase, and the equilibrium interest rate increases.
C) the equilibrium interest rate falls and the amount of investment increases.
D) the equilibrium interest rate rises, and the amount of investment decreases.
E) the equilibrium interest rate falls but the amount of investment is unchanged.