The AD/AS Model, Fiscal Policy and the COVID-19 Pandemic
This assignment connects openstax Principles of Macroeconomics content to the COVID-19 pandemic, subsequent economic slowdown, and fiscal policy actions.
In this assignment, you will be making connections between macroeconomic topics we have been studying and the ongoing health and economic crisis. You may consult outside sources in order to develop your thoughts, but you must make very sure to use your own words when composing your answers. Here are some helpful sources that I suggest:
The AD/AS Model: the COVID-19 pandemic and economic lockdown
- Use the AD/AS model to illustrate the effects of the COVID-19 pandemic and subsequent economic lockdown. Be sure to explain:
- what curve(s) shift,
- in which direction,
- and why specifically (i.e., what AD and/or AS factors are affected by these events)
- discuss what will be the effect on Real GDP, unemployment and inflation given the shift(s) you described
- Finally, include an AD/AS graph to illustrate your answers above.
Fiscal Policy and the CARES Act
Here are some helpful sources, but feel free to consult others in order to answer the questions that follow:
- What kind of fiscal policy package is the CARES Act (discretionary/automatic, contractionary/expansionary)? Justify your answer.
- Break down the CARES Act into its components and discuss which side(s) of the AD/AS model each component is designed to stimulate. Justify your answers.
- Discuss at least three potential problems associated with this Act.
- Based on what you have learned, what do you expect will be the effects of this Act?