Question 3 Suppose that American firms become more optimistic and, for any given interest rate, decide to increase investment expenditure today in new factories and office space. That is, the investment curve shift out. 1. How will this shift in the investment function affect output, interest rates, and the trade balance? 2. Repeat part (1), assuming that domestic investment is very responsive to the interest rate so that U.S. firms will cancel most of their new investment plans if the interest rate rises in a graph where the interest rare is in the y axis and investment is in the x axis, the investment function is very flat). How will this affect the answer you gave in 1? Question 3 Suppose that American firms become more optimistic and, for any given interest rate, decide to increase investment expenditure today in new factories and office space. That is, the investment curve shift out. 1. How will this shift in the investment function affect output, interest rates, and the trade balance? 2. Repeat part (1), assuming that domestic investment is very responsive to the interest rate so that U.S. firms will cancel most of their new investment plans if the interest rate rises in a graph where the interest rare is in the y axis and investment is in the x axis, the investment function is very flat). How will this affect the answer you gave in 1