The commentators on the US economy feel that the US economy fell to a recession in the year 2001 and then proceeded to a slow growth recovery due to a decline in the investment.
Q1. Describe how a change in investment can encompass a big impact on GDp by causing a nationwide slump. Recall that the investment is ‘small’ as relative to the entire economy.
Q2. Describe your reasoning by using the AD/AS model.
Q3. How did low interest rates combined with increased government spending on the defense and homeland security alter the US economic outlook? Describe by using the AD/AS model.