Question

Question 2: As you have learned consumer expectations are a major driver of the short run path of the economy. Consumer spending account for about 70% of GDP and consumer confidence is a major factor in shifting Aggregate Demand. Describe how your expectations about the economy have changed as a result of COVID-19. How are you changing your spending patterns during this pandemic? How will you and your family spend any additional direct payments from the federal government if/when new legislation is passed? Do you expect consumer confidence and business expectations to improve in the months ahead? Which way will the AD curve shift during the fourth quarter (October through December)? Explain your reasoning.

Answer 1

Due to Covid 19, the economy is in nothing short of a recession right now.

I expect that the economy will further go down unless and untill we find a vaccine. Till then buisnesses will be shut, consumer spending will not rise.

Due to the pandemic, I have stopped eating from restaurants due to fear of getting infected.

I do not go shopping every 2 weeks as I went before.

I always think before I buy something now. I check whether it is needed or not.

If me and my family gets any additional direct payments, we wil try to save a major part of the payment, as the times are unpredictable.

Consumer confidence will get a boost only if a vaccine is developed. Till then I expect it to be very low.

October to December is a time of festivals. Due to this people might spend more but not upto the level of last year's October to december.

AD might get a little shift up. Since Spending might get an increase, however it wont be enough to boost the economy.