Question
Three years into the COVID, the pandemic has already switched from the initial supply shock to a demand shock. Many of you have started to
Three years into the COVID, the pandemic has already switched from the initial supply shock to a demand shock. Many of you have started to do some volunteer work, intending to help the economy recover. How does your volunteer work shift the AS curve? Suppose the economy has already been pushed by the demand shock to a liquidity trap featuring a zero nominal interest rate, use the IS-MP-AS framework to show that your volunteer work would actually lead to lower equilibrium output. Explain carefully the economic logics behind and what leads to such a fallacy.
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