Question:

The economic shocks due to the current pandemic began with a supply side contraction: businesses closed their doors and laid off workers, leading to significant reductions in output and income. Use what means of analysis is at your disposal to explain what the consequences of such a shock are for financial and economic performance in the short run. Then consider the shock to be exacerbated by pessimism about the future, with government responses taking the form of debtfinanced transfers. Explain some possible implications of this for financial market behaviour during the recovery.