ase Study. it of The Economic Outlook Report announced the following macroeconomic indicators for a certain economy in 2020 in comparison to 2019: Rate of growth of Real GDP 4% (negative 4%) Rate of inflation ( GDP deflator) 7% Rate of unemployment % of labor force. 12% The Report stated that the business confidence was negatively affected in 2020 due to uncertainty & instability as a result of the Covid 19 Pandemic. The lockdown caused a great decrease in the exports of goods & services. Household demand shrank as many citizens lost their wealth, in addition to the impact of inflationary pressures. Economists advised the government to adopt policies to contront the unfavorable economic & social situation. They urged the Central Bank to decrease the interest rate. Moreover, Doing Business Indicators" have to improve, accordingly they suggested lowering direct business taxes in case of spending on new capital goods that produce products in which the country holds a competitive advantage. Getting rid of bureaucratic paper work is a must to boost investment. They highlighted the importance of government health care spending to save lives. Also governmental expenditure on essential efficient infrastructure in the different districts is necessory. Priority is to be provided to the IT ( Information & Technology ) sector as IT services are linked to the activities of many sectors. Government should provide cash transfers to people who were severely affected by the unsuitable economic status. Moreover government should provide subsidies to sectors that produce products that are used as an input in many other industries. Tax postponement is to be provided to hotels & touristic sites as the previous long lockdown negatively affected their revenues. Acknowledging that their proposal would increase the government budget deficit in the short run, they argued that their strategy focuses on sustainable development, 'net investment digitalization & green economy.

Read the previous case then answer the questions: a) Which approach did the Economic Outlook Report use to measure the real GDP ? ( income or spending approach ; just state WITHOUT any explanation). b) Real GDP growth rate recorded -4% (negative 4%)" state the main reasons, cite evidence from the case study in your analysis. c) Analyze the recommendations of the economists to try to confront the unfavorable situation that the economy experienced in 2020.. ( try to shed light on priorities, policies, tradeoffs & cite evidence from the case study in your analysis. d) Are you for or against the economists' recommendations? Why? e) If the economists recommendations succeed in the short run what will happen to gap & the Lucas wedge? Why? f) State how can the economy finance growth in the short run, if the government will approve & apply the economists recommendations.