Question
In early 2020, as fears of the pandemic spread and governments imposed stay-at-home orders, economic activity contracted sharply. Use the dynamic macroeconomic model (AD-LRAS-SRAS) to
In early 2020, as fears of the pandemic spread and governments imposed stay-at-home orders, economic activity contracted sharply. Use the dynamic macroeconomic model (AD-LRAS-SRAS) to describe this unexpected shock. Given the nature of the shock, what policies might have improved welfare for the representative household. Be sure to indicate why such policies might be expected to raise welfare for the representative household. Note: identifying a policy that improves the welfare of some at the expense of others is insufficient. To demonstrate that the policy improves welfare for the representative household, you must also argue that the benefits of the policy are likely to exceed the costs.
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