Consider a baseline long run steady state equilibrium where output is 22 trillion dollars, and the price level is 100. Note: price expectation is the same as the price level at the long run steady state equilibrium & unemployment is 5% or lower • Starting from the baseline, suppose COVID 19 hits this economy. If this disease only makes workers sick (everything else remaining constant) can you show how would the long run steady state equilibrium will be disrupted & what policies can be taken to stop the market adjustment? Step 4) What happens next in the market adjustment phase? (Think about which curve shifts in which direction and why & where is the new short run equilibrium?) Step 5) What policies (you have to say who takes these policies; congress/federal reserve) will be taken to stop the market adjustment from kicking in?

Consider a baseline long run steady state equilibrium where output is 22 trillion dollars, and the price level is 100. Note: price expectation is the same as the price level at the long run steady state equilibrium & unemployment is 5% or lower • Starting from the baseline, suppose COVID 19 hits this economy. If this disease only makes workers sick (everything else remaining constant) can you show how would the long run steady state equilibrium will be disrupted & what policies can be taken to stop the market adjustment? Step 4) What happens next in the market adjustment phase? (Think about which curve shifts in which direction and why & where is the new short run equilibrium?) Step 5) What policies (you have to say who takes these policies; congress/federal reserve) will be taken to stop the market adjustment from kicking in?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter19: The Macroeconomic Perspective

Section: Chapter Questions

Problem 4SCQ: Without looking at Table 19.7, return to Figure 19.10. If we define a recession as a significant...

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