To curtail the potential outbreak of covid-19, the governments in the world implemented various restrictive measures. The trade and travel restrictions between countries, along with the domestic lockdown and social distancing requirements, caused the HK economy to fall into economic recession since 2020.

a. Use a well-labelled AD-SRAS-LRAS diagram to illustrate and explain the possible short run effects on the equilibrium price, real GDP and unemployment of Hong Kong. (5 marks)

b. To counter the impact of the economic recession, the SAR Government launches various measure including Consumption Voucher Scheme (CVS) which gives eligible residents digital money for consumptions; and Employment Support Scheme (ESS) to give subsidies to those employers who retain their businesses and labour. Use the diagram in part (a) to discuss and illustrate what happen to equilibrium price level, real GDP and unemployment rate of the HK economy. (5 marks)