Question

A) Does GDP include house work, or work performed by people without being paid for it? (Say, a parent taking care of children?) Is that work important? How can we measure the value of such work? What happened to the volume (and value) of such work after the Covid crisis?

B) On Friday, May 8th, 2020 the Department of Labor reported that the unemployment rate in the US for April reached 14.7%. Does this number include discouraged workers, or workers whose work hours have been involuntarily reduced? Does this mean that the "true" number of people who are involuntarily un- or underemployed is higher or lower than the 14.7% reported?

C) What variable is on the x-axis of the AS-AD diagram? What variable is on the y-axis? What was the effect of the lockdown policy on the AS and/or the AD curve(s)? What is the effect on equilibrium prices and quantities? (You don't need to draw a diagram, a verbal answer/description is enough)

D) Consider the efforts at developing a vaccine against coronavirus. Discuss some of the benefits of obtaining a successful vaccine. If you were developing it, would you make it freely available?

Answer 1

A) No.GDP doesn't include housework or work performed by people with out being paid like parents taking care of their children. Work like that is considered as non economic and difficult to measure. Scientific methods to measure such work are still under the development stage. With the outbreak of corona virus, volume and value of such work has increased due to people falling sick and staying at home.

B) No. 14.7 percent doesn't include discouraged labour since discouraged labour isn't considered as part of labour force. True number of people who are unemployed will be higher than 14.7 percent of discouraged labour is added into calculation of unemployment.

C) Quantity of output or real GDP is measured along the X axis and pricelevel is measured along the Y axis. With the outbreak of corona virus, aggregate demand will be reduced due to fall in its components like consumption and investment. Aggregate demand curve will shift to the left. The virus outbreak has resulted in a halt in the production of many commodities and supply chain disruptions causing a residential in aggregate supply. Therefore aggregate supply curve will also shift to the left.

D) lf a vaccine is developed against corona virus, it will be a boon to the mankind. Death count will fall. Sickness won't last. Quarantine will be lifted early with appropriate precautions. People will be able to go for work. Slowly the economy will be back on track. Saving the lives of people will eventually save the economy from destruction.

However the medicine doesn't need to be made freely available for all . But it should be provided free of cost to those disadvantaged sections of society, who can't afford it. The price must be low too, only enough to cover costs of manufacturing since we are undergoing a catastrophic situation.