Note:For this assignment, assume the United States is a completely closed economy for simplicity.

1.Identify one of the initial direct effects (shocks) of the COVID crisis on the macroeconomy and describe the circumstances surrounding the specific effect you selected. Analyze the impact of this shock by using the AD-AS model and its corresponding diagram.Describe the impact on the aggregate price level and output and identify the resulting short-run equilibrium in a diagram. Assume that the economy was in long- and short-term equilibrium before the shock.(Please note that while COVID affected the US economy in multiple ways, the assignment asks you to focus on one particular effect of your choice. For simplicity at this point, you can assume that COVID affected the economy only through the channel you selected.)

2.Using the AD-AS diagram created in Requirement 1, identify and evaluate the impact of one government policy response to the channel you selected and its effect on the short-run equilibrium of the economy.You can draw a new AD-AS diagram or use the diagram created in Requirement 1. For simplicity at this point, you can assume that there was only one policy response.

3.Using your AD-AS diagram created in Requirement 1 and modified in Requirement 2, describe the process by which the economy may return to its long-run equilibrium.What are your long-term predictions for equilibrium output and the price level?For simplicity at this point, you can assume that there are no additional shocks from COVID and no additional governmental policy responses.

4.Based on the predictions for output and the price level from Requirement 1, 2 and 3, discuss one implication for the business or industry in which you are currently employed.Alternatively, discuss one implication for an industry of your choosing. Discuss both the short-run and long-run implications for this industry.