When the pandemic hit in the beginning of 2020, everything came to a halt. In a single month, 17 million Americans lost their job, and the gross domestic product (GDP), which is how economists measure the total value of a country's products and services, declined by US$2.15tn (£1.55tn). Economists were hopeful that across the world government spending and monetary policy would keep the economy from totally collapsing. During the first wave of lockdowns and stay-at-home orders since December 2019, it was clear that industries that relied on in-person customers - like travel and some retail - were going to struggle, while others would more easily adapt to the "new normal". Tech-heavy companies that delivered products or services to people's homes—like Amazon, Netflix, and Shopify—thrived. To improve the impact of the pandemic, most countries adopted an expansionary monetary policy. The change in the real interest rate influenced the goods market. Aggregate demand changed but there was no change in aggregate supply. Over time, it is expected that central banks will increase the provision of loans. With a lower interest rate, the quantity of money increases and the supply of loans are expected to increase. Respond to the following questions based on the above scenario. Explain your choices in your own words in no more than 4 sentences and draw diagrams as appropriate to depict the different outcomes. (a) How do you think the above impacted Real GDP and the inflation rate? (b) Do you think the economic growth rate will be higher in the short-term? Explain your choice in terms of the movement(s) of the AD-AS curves.
When the pandemic hit in the beginning of 2020, everything came to a halt. In a single month, 17 million Americans lost their job, and the
To improve the impact of the pandemic, most countries adopted an expansionary monetary policy. The change in the real interest rate influenced the goods market. Aggregate
Respond to the following questions based on the above scenario. Explain your choices in your own words in no more than 4 sentences and draw diagrams as appropriate to depict the different outcomes.
(a) How do you think the above impacted Real GDP and the inflation rate?
(b) Do you think the
(c) What might be the impact on the long-term economic growth? Explain your choice in terms of the movement(s) of the AD-
(d) Given the reduced trade between nations, countries will try to adjust their foreign exchange rate to reduce trade deficits. How will the country you chose for your presentation respond to improve their
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