The outbreak of COVID-19 has had a significantly impact on the economy.

a)How the demand for goods and services are impacted? (hint: consumers and firms) (2 marks)

b)What is the immediate impact on key macroeconomic indicators such as unemployment rate, inflation, and output? (hint: use IS-LM and AS-AD model with graphs) (3 marks)

c)What is likely to be the medium-run impact on the unemployment rate, inflation, output, and interest rate? (hint: use IS-LM and/or AS-AD model with graphs) (4 marks)

The Australian government has announced three stimulus packages:

*12 March: $17.6 bn (0.9% GDP)

*22 March: $66 bn (3.3% GDP)

*30 March: $130 bn (6.5% GDP)

which aim at:

Consumers

Cash payment to welfare recipients

Small and medium size businesses

Cash payment

Investment incentives

Loan guarantees

Keeping jobs

Wage subsidy worth 50% apprentice or training wages

Jobkeeper payment @ 1,500 per fortnight

d)Discuss how do these policies help the economy? (2 marks)

e)Do you think these policies address the key issue of the economic problem and why? (2 marks)