Answer part a only Due to COVID-19, an economy that is initially at full employment facesa substantial decrease in consumption and investment. With this in mind,answer the following questions.Part (a)Discuss, with the aid of aggregate output market and money marketdiagrams, the short-term effect on output, unemployment, the generalprice level and interest rate.Part (b)Discuss, with the aid of an aggregate output market diagram, what kindof monetary policy can be adopted to restore the economy to the fullemployment equilibrium.Part (c)Suppose the problems discussed in part (a) rely on the self-adjustmentmechanism instead of the discretionary policy proposed in part (b).Examine the possible impacts of minimum wage on the self-adjustmentmechanism.6 (Ctrl)

Part (a) A decrease in consumption and investment would lead to a decrease in Aggregate demand and…

Due to COVID-19, an economy that is initially at full employment faces a substantial decrease in consumption and investment. With this in mind, answer the following questions. Part (a) Discuss, with the aid of aggregate output market and money market diagrams, the short-term effect on output, unemployment, the general price level and interest rate.

Due to COVID-19, an economy that is initially at full employment faces a substantial decrease in consumption and investment. With this in mind, answer the following questions. Part (a) Discuss, with the aid of aggregate output market and money market diagrams, the short-term effect on output, unemployment, the general price level and interest rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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