22. What could have caused the Investment function to move from I1 to I2? 23. Assuming that the Investment function moves from I1 to I2, and assuming the market rate of interest in at 15%, by how much would investment spending decrease?
22. What could have caused the Investment function to move from I1 to I2? 23. Assuming that the Investment function moves from I1 to I2, and assuming the market rate of interest in at 15%, by how much would investment spending decrease?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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22. What could have caused the Investment function to move from I1 to I2?
23. Assuming that the Investment function moves from I1 to I2, and assuming the market rate of interest in at 15%, by how much would investment spending decrease?
Transcribed Image Text:The image is a graph titled "Investment Function," depicting the relationship between interest rates and investment levels.
**Axes:**
- The vertical axis is labeled "%" and ranges from 0 to 25, representing the interest rate.
- The horizontal axis is labeled "$" and ranges from 0 to 50, representing the amount of investment.
**Lines:**
- There are two downward-sloping blue lines labeled \( I_2 \) and \( I_1 \). These lines indicate different investment functions where investment decreases as the interest rate increases.
- A horizontal red line intersects both blue lines at an interest rate of 15%. This represents a constant interest rate at which varying levels of investment are determined.
**Interpretation:**
- The downward slope of the blue lines suggests that as interest rates decrease, the level of investment increases.
- The shift from \( I_1 \) to \( I_2 \) indicates a change in investment levels, possibly due to external factors affecting the investment function.
- The red line indicates a constant interest rate scenario at 15%, showing how different levels of investment (\( I_1 \) and \( I_2 \)) respond to the same interest rate.
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