Question 1:

PPF and Circular Flow

Use the Circular flow Diagram and Production Possibilities frontier to illustrate the impact of Covid-19 and policies designed to mitigate the impact of Covid 19.You may use this publication:

In response to the COVID-19 outbreak, governments and public health authorities around the world implemented confinement and mitigation measures such as social distancing. These measures effectively led to the controlled shutdown of entire sectors of the economy, especially those that supply economic activities and services involving high physical contact with other people, such as restaurants, hairdressers, airlines, etc. On one hand, authorities forced many such establishments to close and send their workers home (the so-called lockdowns). On the other hand, consumers themselves also reduced their consumption of these services, regardless of public health policy recommendations.1 Furthermore, as workers in some of these services lose their jobs and income, they also reduce their purchases of other goods and services. This, combined with uncertainty about the evolution of the pandemic, leads to a reduction in demand for goods and services across the board, affecting not just these locked down sectors (Gourinchas 2020).

Question 2:

Select the normative statements only from the list: (Example: # 1, 2, 3.... etc. ) and explain your answer.

1. A fall in incomes will lead to a rise in demand for own-label supermarket foods.
2. If the government raises the tax on beer, this will lead to a fall in profits of the brewers.
3. Investors should adopt a socially responsible investment approach i.e. do not invest in vice stocks i.e. tobacco, gambling, etc
4. Unemployment is more harmful than inflation.
5. The government should enforce minimum prices for beers sold in supermarkets.
6. A reduction in income tax will improve the incentives of the unemployed to find work.
7. The government should increase the minimum wage to $15 per hour to reduce poverty.
8. A rise in average temperatures will increase the demand for sunscreen products.
9. Higher interest rates will reduce house prices.
10. Adopting protectionist policies results in shrinkage of the total global gross domestic product.
11. Wealth tax should be implemented to reduce the disproportionate distribution of wealth.
12. Tariffs should be increased on imports from countries with poor human rights records.
13. Antitrust legislation does more harm than good.