reflect on the type of shock that hit the economy, how is this shock different from other shocks that created economic and financial crises in the recent past, the idea of having two distinct sectors on the economy and how they interact. Moreover, think about the role of demand and production in the short-run as well as the societal changes we might have in the long run. Are some sectors of the economy going to vanish? Are others flourishing? Discuss the type of firms we can have (insolvent, illiquid and solvent) and how policy making should be designed targeting each type of company. Finally, discuss the different ways European countries and the USA tackled the economics of covid and the consequences for the labor and goods markets.
What happened first was a major policy-induced supply shock. The lockdown forced firms in several directly affected sectors, from restaurants to hotels to airlines, to halt (or at least to drastically decrease) supply. In contrast to other supply shocks analyzed earlier in the book, many firms had no choice other than to stop or decrease production.
As a result of sharply lower output, and thus lower income, and of increased uncertainty, this shock had a major effect on demand, not just in the sectors directly affected by the lockdown, but also in the non-affected sectors. Thus, the outcome was a combination of a supply shock and a sharp demand response.
In that context, the role of
Source: “Covid chapter” Blanchard (2021). Blanchard (2021)
A course in economics cannot ignore the fact that we have gone through an unprecedented pandemic crisis with major macroeconomic implications. This task will guide you through the way we can think about the pandemic in light of our macroeconomic models, the policy solutions and the medium to long term implications for society. On Canvas, you will find a document entitled “chapter on covid” which will be the reference for this task. Among other things, you are asked to reflect on the type of shock that hit the economy, how is this shock different from other shocks that created economic and financial crises in the recent past, the idea of having two distinct sectors on the economy and how they interact. Moreover, think about the role of demand and production in the short-run as well as the societal changes we might have in the long run. Are some sectors of the economy going to vanish? Are others flourishing? Discuss the type of firms we can have (insolvent, illiquid and solvent) and how policy making should be designed targeting each type of company. Finally, discuss the different ways European countries and the USA tackled the economics of covid and the consequences for the labor and goods markets.
Step by step
Solved in 7 steps
