The COVID-19 pandemic dealt a massive blow to the Australian economy in the first half of 2020.

The tourism and education sectors, two of the top exporting industries in Australia, were brought down to their knees as the federal government moved to close international borders in March 2020. At the same time, a large number of businesses were forced to shut down as restriction measures were imposed across the country.

Dr. Philip Lowe, the governor of the Reserve Bank of Australia (RBA), described the pandemic as a 'once-in-a-century event', which caused 'the biggest contraction in national output and income ever witnessed since the 1930s'.

Question1.Clearly explain how aggregate demand (AD), short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) would be affected by the COVID-19 pandemic.(1 + 1 + 1 = 3 marks)

Question2.Draw appropriate diagram(s) to illustrate the effects on the Australian economy caused by the COVID-19 pandemic. Make sure to clearly and adequately label your diagram(s). Assume that before the pandemic, the Australia economy was at the long-run equilibrium.(3 marks)

Question3.Clearly explain how key macroeconomic variables (general price level, real GDP, and unemployment rate) would change as a result of the COVID-19 pandemic.(1 + 1 + 1 = 3 marks)