Question
Regarding (AD-AS Model), and the following article: https://www.nytimes.com/2020/04/09/business/coronavirus-unemployment-washington.html(Links to an external site.) I need help of explaining the 3 following point to understand the article
Regarding (AD-AS Model), and the following article:
https://www.nytimes.com/2020/04/09/business/coronavirus-unemployment-washington.html(Links to an external site.)
I need help of explaining the 3 following point to understand the article above and how it is relating to Aggregate supply and Aggregate Demand models:
1. First, let's think about the size of the government response.If we were to use the Aggregate Supply - Aggregate Demand model to visualize the government's expectations about what would happen to the economy because of the pandemic, and compare that to what actually happened, how would they do this?Which curves did the government expect to shift, and how far?Which curves shifted further than the government expected, and why?Do you think that there was sufficient information coming from other countries to help policymakers make accurate estimates of how far Aggregate Supply and Aggregate Demand would fall?If so, then why do you think that the government underestimated the true effects?Do you think the government was concerned about starting a panic among households and businesses?If so, how would we represent the effects of such a panic on the economy, using the Aggregate Supply - Aggregate Demand model?
2. Given that the initial policy response to the economic problems caused by the pandemic were too small, does having to "catch up" with the economic damage present special challenges to economic policy?If the current size of the government response is too small, how can we show that in the Aggregate Supply - Aggregate Demand model?Is the problem simply one of increasing the policy response until we push GDP back to its pre-pandemic equilibrium?Or are there economic responses to the downturn (or to the policy actions themselves) that make this more difficult?If so, what are these responses?Is there some sense in which the government now has to make an even larger response than the Aggregate Supply - Aggregate Demand model implies, in order to convince households and businesses that it has the situation under control?
3. Once this crisis is over, there will be calls to improve how we design and execute economic policies of all kinds.If you were asked to be part of this effort, where would you suggest we focus our efforts first?What are the most important areas for improvement?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started