The AD/AS Model, Fiscal Policy and the COVID-19 Pandemic
Overview
This assignment connects openstax Principles of Macroeconomics content to the COVID-19 pandemic, subsequent economic slowdown, and fiscal policy actions.
Name ___________________
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:
openstax Principles of Macroeconomics 2e: Chapter 11
openstax Principles of Macroeconomics 2e: Chapter 17
U.S. Department of the Treasury: The CARES Act
NPR: What's Inside The Senate's $2 Trillion Coronavirus Aid Package
Motley Fool Podcast: 8 Highlights of the CARES Act You Should Know
Planet Money: Three Ideas to Fight the Recession
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?