Pandemics such as Covid 19 would produce adverse eects on both the demand side and supply side of the macroeconomy. In answering the questions below, assume for simplicity that the country in question is a closed economy with zero trade balance (N X = 0 ' CA) and zero capital ows (KF A = 0) For each of the curves below, state the direction(s) in which it would shift leftward? rightward? upward? downward? ambiguous? no shift? in direct response to the loss of consumer conmfidence and investor confidence (i.e., 1st-round shifts)., and then provide an explanation. Consumption demand (i.e., the C-curve) Investment demand (i.e., the I-curve) Supply of loanable funds (i.e., the Ls-curve) Demand for loanable funds (i.e., the Ld-curve) Supply of real balances (i.e., the ms-curve) Demand for real balances (i.e., the md-curve) IS curve LM curve2 AD curve

2. For each of the variables below, state the direction in which its equilibrium level would change increase? decrease? ambiguous? no change? in the long run (LR) in response to the loss of consumer condence and investor condence in the nal analysis (incorporating both direct/1st-round effects and indirect/2nd-round effects) in the absence of supply-side eects, and then provide an explanation. Real wage (w) ; nominal wage (W ) ; labor employment (N ) ; and cyclical unem- ployment (4u) determined in the labor market.

Real rental (rk) ; nominal rental (Rk) ; and capital employment (K) determined in the capital-input market Real interest rate (r) ; quantity of loans (L) ; saving (S) or quantity supplied of loans (Ls) ; and quantity demanded for loans Ld determined in the loanable- funds market The price level (P ) ; real interest rate (r) ; real output/income (Y ) ; composition of output ( viz., consumption (C) ; investment (I) ; and government purchases (G) determined in the good market( Nominal interest rate (R) and real balance (m = M=P ) determined in the money market 3. Repeat the exercise in part (2) above for the short run (SR) : 4. How would you modify your answers to questions (1)&(3) above if (in addition to consumer pessimism and real-investor pessimism) nancial investors have also become pessimistic about the future of the bonds market? [You dont have to discuss the effects on all of the curves and variables above. Simply focus on those curves and variables that you believe this Financial-investor pessimism would affect.