Answer the question on the basis of the following information.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 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 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.

Question

Quizplus · Accepted Answer

The relationship between the interest rate (i) and investment (I) is inversely proportional, where a 4 percentage point decrease in the interest rate results in a $10 billion increase in investment. The correct equation is i = 20 - 0.4I, where each $10 billion in investment corresponds to a 4 percentage point decrease in the interest rate from the base of 20 percent.

Answer the Question on the Basis of the Following Information