Discussion on AD/AS model
Commentators on the US economy feel the US economy fell into a recession in 2001 also then proceeded into a slow-growth recovery due to a decline in investment.
a. Elucidate describe how a change in investment can have a big impact on GDP causing a nationwide slump. Recall which investment is small relative to the whole economy
b. Illustrate your reasoning using our AD/AS model
c. describe how did low interest rates combined with increased government spending on defence also home land security alter the US economic outlook? Elucidate using our AD/AS model.