Macroeconomics 16th Edition by Campbell R. McConnell Test bank

 

205)       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 correctly expresses the indicated relationship as an equation?

      
       A) i = 20 - 4I.     
       B) i = 20 -.4I.
       C) i = 24 -.4I.
       D) i = 20 - 10I.
      

 

206)       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
      

 

After-tax income	Consumption
$1000	$900
2000	1800
3000	2700
4000	3600
5000	4500

 The above data suggest that:

      
       A) consumption varies inversely with after-tax income. 
       B) consumption varies directly with after-tax income.
       C) consumption and after-tax income are unrelated.
       D) a tax increase will increase consumption.
      

 

After-tax income	Consumption
$1000	$900
2000	1800
3000	2700
4000	3600
5000	4500