Q2 a (4 points) This question will concentrate on using our AS-AD model to understand the economic consequences of the COVID-19 pandemic, as well as policies currently being enacted or considered. Imagine it is January of 2020, the US economy has record-low unemployment rates, and GDP is above potential GDP. As awareness about COVID spreads, businesses begin to enact heightened cleaning routines and social distancing which results in a fall in productivity. The stock market falls due to low consumer confidence, and spending on travel and restaurants plummet. Using an AS-AD diagram (as well as an AE-Y diagram to show the mechanics of any shift to AD), show the effects of these events, discussing real GDP, price levels, and unemployment. Drag and drop an image or PDF file or click to browse...Q2 c (3 points) As vaccines become more available, the US Government is looking for ways to stimulate the economy. The congression Budget Office (CBO) provides the estimated multipliers from a large stimulus package in 2015 (the American Recovery and Reinvestment Act): Fiscal Policy Estimated Multiplier One-time transfer Payments to Individuals 0.4 to 2.1 Tax cuts to low-middle income 0.3 to 1.5 Tax cuts to high income 0.1 to 0.6 Corporate Tax cuts influencing cash-flow 0.0 to 0.4 What factors do you think are influencing the relative size of these multipliers? + Drag and drop an image or PDF file or click to browse...+ Drag and drop an image or PDF file or click to browse... Q2 b (3 points) As the economy begins to worsen Claudia Sahm (formerly director of macroeconomic policy at the Washington Center for Equitable Growth) proposes a new policy that provides American's with an automatic lump-sum stimulus payment when the three-month average national unemployment rate rises by at least .5 % compared to its low in the last year. What kind of policy is this? Discuss the effects of this policy proposal if it was in place as the changes in (a) took place. + Drag and drop an image or PDF file or click to browse... Q2 c (3 points)