4. The following chart is for the US economy showing fluctuations in investment in new technologies, particularly in information and communications technology. The Nasdaq Index includes the shares of companies from industries such as computer hardware and software, telecommunications and biotechnology.n?

a) Why does investment in new technology by one firm create incentives for other firms to invest? Explain by discussing the rapid uptake in new information and communication technologies.

b) Why is the stock price more volatile than the level of firms investment?

c) Why is investment more volatile than consumption?

Growth of nominal GDP (%) 50 40 30 20 10 0 -10 -20 -30 -40 -50 1991 1992 1993 1994 1995 1996 1997 1998 2009 2010 2011 2012 2013 2014 2015 Year Growth of investment in new technologies (%) Growth of Nasdaq index (%) Growth of nominal GDP (%) Years of recession (from NBER)