The Diagram Below Show the Market for Financial Capital Assuming

question 13

Multiple Choice

The diagram below show the market for financial capital assuming that national income is constant at potential GDP,Y*. FIGURE 25-2
-Refer to Figure 25-2.Suppose national saving is reflected by NS₀ and investment demand is reflected by I₀^D.Now suppose the government implements a revenue-neutral tax policy that encourages investment.What is the effect on the quantity of national saving?

• A)There is no effect on NS or I^D and the quantity of national saving supplied remains at I*.
• B)National saving shifts to ,and the quantity of national saving supplied rises to I₂.
• C)Investment demand shifts to I₁^D and the quantity of national saving supplied rises to I₁.
• D)Investment demand shifts to I₁^D,national saving shifts to NS₁,and the quantity of national saving rises to I₃.
• E)National saving shifts to ,investment demand shifts to I₁^{D,and the quantity of national saving rises to} .

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