1. The pandemic induced recession that began in March 2020, was caused by many households staying at home and thus decreasing consumption spending to avoid catching COVID. In terms of the multiplier model this is called a decrease in"autonomous consumption".

a)Draw the Multiplier Model graphand indicate on your graph which way the Aggregate Demand (AD) curve shifts and what happens to equilibrium Real GDPdue to a decline autonomous consumption.Be sure to label the curves and both the vertical and horizontal axis of your graph.

b)Use a flow diagramto provide the intuition for the change in Real GDP, employment, income and consumption in response to the decline autonomous consumption.

c) How will monetary and fiscal policy along with changes in household consumption spending result in a recovery (hopefully soon!) from the pandemic induced recession? In your answeruse The Multiplier Model graph and a flow diagramto explain what happens to aggregate demand, real GDP, employment and consumption as the economy recovers.

d) Given your answer to part c) under what condition, according to our macroeconomic model, will the economy recovery result in an increase in inflation above the current level of about 2%?