Question

written and graphical analysis of the Covid outbreak in terms of Aggregate Supply and Demand. Specifically, - Is the pandemic a supply shock or demand shock? Why? (You can tell by the changes in prices, employment, and GDP) - If the economy self-corrects over time, what would happen to the above variables? Why? (Discuss how SRAS would change) - Has there been a permanent change in the economy's natural level of output / potential GDP? (i.e., has the LRAS curve shifted and why? Note that if LRAS changes along with the shock, there may not be a self-correction) - Are there Keynesian (sticky price) factors that would hinder self-correction? - What types of economic policies do you recommend? Fiscal or monetary? Expansionary or contractionary? Why? Include 1) AS/AD graph(s) that support the argument and 2) at least two cited references to economic data (GDP, unemployment rate, inflation rate, etc.) that would support your argument

Answer 1

This pandemic is definitely demand shock but due to lockdown our industries are stand still due to which there will be disruption in supply chain which will be seen later with time.