5,Suppose that when the interest rate on loans is 16 percent, businesses find it

unprofitable to invest in machinery and equipment. However, when the

interest rate is 14 percent, $5 billion worth of investment is profitable. At 12

percent interest, a total of $10 billion of investment is profitable. Similarly,

total investment increases by $5 billion for each successive 2-percentagepoint

decline in the interest rate. Describe the relevant relationship between

the interest rate and investment in a table, on a graph, and as an equation. Put

the interest rate on the vertical axis and investment on the horizontal axis. In

your equation use the form i = a + bI, where i is the interest rate, a is the

vertical intercept, b is the slope of the line (which is negative), and I is the

level of investment.

6,Suppose that C = a + bY, where C = consumption, a = consumption at zero

income, b = slope, and Y = income.

a. Are C and Y positively related, or are they negatively related?

b. If graphed, would the curve for this equation slope upward or slope

downward?

c. Are the variables C and Y inversely related or directly related?

d. What is the value of C if a = 10, b = 0.50, and Y = 200?

e. What is the value of Y if C = 100, a = 10, and b = 0.25?

7,The accompanying graph shows curve XX and tangents at points A, B, and C.

Calculate the slope of the curve at these three points

8. In the accompanying graph, is the slope of curve AA positive or negative?

Does the slope increase or decrease as we move along the curve from A to A?

Answer the same two questions for curve BB.