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This question will concentrate on using our AS-AD model to understand the economic consequences of the COVID-19 pandemic, as well as policies currently being enacted
This question will concentrate on using our AS-AD model to understand the economic consequences of the COVID-19 pandemic, as well as policies currently being enacted or considered. Imagine it is January of 2020, the US economy has record-low unemployment rates, and GDP is above potential GDP. As awareness about COVID spreads, businesses begin to enact heightened cleaning routines and social distancing which results in a fall in productivity. The stock market falls due to low consumer confidence, and spending on travel and restaurants plummet. Using an AS-AD diagram (as well as an AE-Y diagram to show the mechanics of any shift to AD), show the effects of these events, discussing real GDP, price levels, and unemployment
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