According to the cumulative investment table above, if the real interest rate falls from 20% to 16%, then:
A) $180 billion of additional investments will be undertaken
B) $330 billion of total investments will be undertaken
C) $30 billion of additional investments will be undertaken
D) $440 billion of total investments will be undertaken

Question

According to the cumulative investment table above, if the real interest rate falls from 20% to 16%, then:
A) $180 billion of additional investments will be undertaken 
B) $330 billion of total investments will be undertaken 
C) $30 billion of additional investments will be undertaken 
D) $440 billion of total investments will be undertaken

Quizplus · Accepted Answer

From the table, we can see that at a real interest rate of 20%, the cumulative investment is $450 billion. Now, if the real interest rate falls to 16%, the cumulative investment will increase to $480 billion. Therefore, the additional investments undertaken will be the difference between the two, which is $30 billion. So, option C is the correct choice.

According to the Cumulative Investment Table Above, If the Real