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.
Answer: B
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Geographic restrictions on banks
A) reduce their ability to take advantage of economies of scale. B) raise the costs of their providing risk-sharing, liquidity, and information services. C) reduce their exposure to credit risk. D) reduce the amount of local lending they undertake.
An advantage of the corporate form of business organization is
A) unlimited liability. B) easier access to capital. C) that profits are taxed only on one level. D) government supervision of its activities.