Question

Question 18 (20 points) With COVID 19, the economy is experiencing unprecedented territory; businesses have to accommodate workers and customers for their safety with personal protective gears, and social distancing, such as limit the number of customers. In the meantime, many consumers are cutting their spending due to negative news, such as temporary pay cuts and economic uncertainty in near future. a. With the given information, what'd happen to the economy in short run? b. And what'd happen to the economy in long run, specifically, explain how long run adjustment occurs. State a new equilibrium price level and output in the economy and explain why using module 5. Aggregate Demand and Aggregate Supply. (It is assumed that the economy was initially in long run equilibrium and everything else stays constant.)

Answer 1

Answer a. In the short run this will have a huge impact on the demand and supply of the labor , workers, groceries,clothings,other outfit , and many more thing which will cause the shut down of many companies and small business .

b. While in the long run , if proper fiscal policy is implemented post covid the economic adjustment would lay down positive result on the economy .The small business can run by policy like CARES act .Also in the long run , it would be initially difficult for many manufacturing plant to run but it will be normal in a period of time .Raising the aggregate supply and demand to normal .

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