The outbreak of COVID-19 adversely attacks most economies. Some economists 頁 argue that the impacts on the macroeconomy mainly come from (i) the reduction in consumption and investment appetite, while others believe that the impacts mainly come from (ii) the immediate destruction of the supply-chain and production. Suppose two quarters since the outbreak of the COVID-19, changes in selected macroeconomic data of Country X can be summarized as below: Last year This year Annualized economic growth rate 4% -6% Unemployment rate 5% 8% Inflation rate 2% 5% a. Using an AD-AS model, explain whether argument (i) or (ii) above fits better to the case of Country X. b. Given your answer in (a), briefly discuss one plausible short-run dilemma facing the central bank of Country X.

The outbreak of COVID-19 adversely attacks most economies. Some economists 頁 argue that the impacts on the macroeconomy mainly come from (i) the reduction in consumption and investment appetite, while others believe that the impacts mainly come from (ii) the immediate destruction of the supply-chain and production. Suppose two quarters since the outbreak of the COVID-19, changes in selected macroeconomic data of Country X can be summarized as below: Last year This year Annualized economic growth rate 4% -6% Unemployment rate 5% 8% Inflation rate 2% 5% a. Using an AD-AS model, explain whether argument (i) or (ii) above fits better to the case of Country X. b. Given your answer in (a), briefly discuss one plausible short-run dilemma facing the central bank of Country X.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The outbreak of COVID-19 adversely attacks most economies. Some economists
e/2
argue that the impacts on the macroeconomy mainly come from (i) the reduction
in consumption and investment appetite, while others believe that the impacts
mainly come from (ii) the immediate destruction of the supply-chain and
production.
Suppose two quarters since the outbreak of the COVID-19, changes in selected
macroeconomic data of Country X can be summarized as below:
Last year
This year
Annualized economic growth rate
4%
-6%
Unemployment rate
5%
8%
Inflation rate
2%
5%
Using an AD-AS model, explain whether argument (i) or (ii) above fits better to
а.
the case of Country X.
b.
Given your answer in (a), briefly discuss one plausible short-run dilemma facing
the central bank of Country X.

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