Analyzing the impact of change in investment on GDP using AD/AS model.
Commentators on the US economy feel the US economy fell into a recession in 2001 and then proceeded into a slow =growth recovery due to a decline in investment.
A.Explain how a change in investment can have a big impact on GDp causing a nationwide slump.Recall that investment is "small' relative to the whole economy.
B.Illustrate your reasoning using our AD/AS model.
C. Explain how did low interest rates combined with increased government spending on defense and homeland security alter the US economic outlook?Explain using our AD/AS model.