Question:
The financial crisis that hit the United States first and then the world economy starting in fall 2007 meant that the future prospects of many firms looked gloomy at best for some time. Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate. Show your answer using a graph.
Additional Information:
The question is belongs to the recent financial crisis in the United States and then on the world economy in 2007. Investment during recession is discussed using a curve taking into account savings and interest rates.