You are considering investing in a new computer for your small business. Having another computer will help you serve more customers, and you seem to have plenty of interested customers. However, you want to consider whether this is a good time to get a new computer or not based on macroeconomic conditions, since this represents a considerable expense for your business. 1. Start by choosing factors to consider. Explain why and how the following factors are important for you decision: a. Explain the importance of the level of interest rates for your decision. How would a higher interest rate affect your decision and why? In general, how are higher interest rates expected to affect investment spending? b. Explain the role of the state of the economy. How can your expectations about the future state of the economy affect your investment decision? (ex: how would an expectation that we are going into a recession affect your decision?) 2. You will now look at data relevant to your decision, starting with interest rates. a. Go to FRED and find the following data series for interest rates: (i) the federal funds effective rate, and (ii) the bank prime loan rate, which is the best interest rate that banks offer their business customers. Combine the two lines in one graph. Set your start date to about Jan. 2000. Download your interest rate graph and include it in your journal. b. Comment on your graph: i. What has happened to nominal interest rates over the past 3 years? ii. What seems to be the relationship between the two interest rates? c. Given that the consumer price inflation rate (CPI) was close to 9% from 2021 to 2022 and went down to 3% from 2022 to 2023 and has stayed close to 3% until now, what has happened to the real interest rate over the same period? (No numbers needed, just a general statement with a brief explanation.) d. What happened to the cost of borrowing over the past 3 years? 3. Now you want to think about possible risks to the future economy. a. Draw the AD and SRAS curves in the same diagram. Label the axis and the graphs. Mark the initial equilibrium as Y1, P1. b. Make a list of three events that could cause a recession in the future, either by shifting the AD or the SRAS curve. c. Pick one of them. Illustrate in your AD-SRAS diagram how the event will affect the AD and/or SRAS curve to show a recession. Explain briefly why your curve shifts.