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Assume That If the Interest Rate That Businesses Must Pay

question 83

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Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment so that investment would be zero.But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion.If the interest rate were 12 percent, $20 billion would be invested.Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.Refer to the above information.Which of the following is the correct graphical presentation of the indicated relationship? Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment so that investment would be zero.But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion.If the interest rate were 12 percent, $20 billion would be invested.Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.Refer to the above information.Which of the following is the correct graphical presentation of the indicated relationship?   A) line 4 B) line 3 C) line 2 D) line 1


Definitions:

Odds

The ratio of the probability of an event happening to the probability of it not happening, often used in gambling and statistics.

Probability

A numerical representation, ranging from 0 to 1, indicating the probability of an event's occurrence.

Explanatory Variable

An explanatory variable is a type of independent variable that is used to explain variations in the dependent variable.

Statistical Inference

The process of drawing conclusions about a population's characteristics based on a sample drawn from it.

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