Exhibit: Saving, Investment, and the Interest Rate 2

question 28

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

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Definitions:

Total Taxes

The cumulative amount of taxes owed by an individual or corporation to the government, including federal, state, and local taxes.

Taxable Income

The amount of income that is used to calculate an individual's or a company's income tax due.

Personal Income Tax

A tax levied on individuals or entities based on their income or profit earned.

Taxable Income

The portion of an individual's or corporation's income upon which taxes are assessed, after allowances for deductions and exemptions.