Question

What will be the level of interest rate, i, if investment at 0 interest is $16 million and the coefficient of invest, I, equals 0.4.

Answer 1

The right solution is "16 +0.4r". A further explanation is given below.

Step-by-step explanation:

The given values are:

Autonomous investment,

I = 16 million

Coefficient of investment,

g = 0.4

As we know,

Economy's investment function will be:

⇒
`I(r) = I + gr`

On substituting the given values, we get

⇒
`=16+0.4r`