Exhibit: Saving, Investment, and the Interest Rate 2 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 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

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The Answer of Exhibit: Saving, Investment, and the Interest Rate 2 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 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

Exhibit: Saving, Investment, and the Interest Rate 2 the Economy