Answer the question below on the basis of the following information for a private closed economy: $$\begin{array}{l}
\begin{array} { c c }
\underline{\text { Gross Domestic Product }} &\underline{ \text { Consumption }} \
\$100& \$ 120 \
200 & 180 \
300 & 240 \
400 & 300 \
500 & 360
\end{array}\
\begin{array} { c c }
\underline{\text { Expected Rate of Return }} &\underline{ \text { Amount of Investment }} \
25 \% & \$ 0 \
20 & 20 \
15 & 40 \
10 & 60 \
5 & 80
\end{array}
\end{array}$$ Refer to the information.The data suggest that:
A) the interest rate and the equilibrium GDP are directly related.
B) the interest rate and the equilibrium GDP are inversely related.
C) the interest rate and the equilibrium GDP are unrelated.
D) as the interest rate falls,investment also falls.

Question

Answer the question below on the basis of the following information for a private closed economy: $$\begin{array}{l}
\begin{array} { c c } 
\underline{\text { Gross Domestic Product }} &\underline{ \text { Consumption }} \
\$100& \$ 120 \
200 & 180 \
300 & 240 \
400 & 300 \
500 & 360
\end{array}\
\begin{array} { c c } 
\underline{\text { Expected Rate of Return }} &\underline{ \text { Amount of Investment }} \
 25 \% & \$ 0 \
20 & 20 \
15 & 40 \
10 & 60 \
5 & 80
\end{array}
\end{array}$$ Refer to the information.The data suggest that:
A) the interest rate and the equilibrium GDP are directly related.
B) the interest rate and the equilibrium GDP are inversely related.
C) the interest rate and the equilibrium GDP are unrelated.
D) as the interest rate falls,investment also falls.

Quizplus · Accepted Answer

The graph shows an inverse relationship between the interest rate and equilibrium GDP. As the interest rate increases, investment decreases, which, in turn, reduces the level of equilibrium GDP. Therefore, option B is the correct answer.

Answer the Question Below on the Basis of the Following