We are currently experiencing the pandemic of Coronavirus, and the whole economy is paused. This question asks you to us

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We Are Currently Experiencing The Pandemic Of Coronavirus And The Whole Economy Is Paused This Question Asks You To Us 1 (100.9 KiB) Viewed 24 times

We are currently experiencing the pandemic of Coronavirus, and the whole economy is paused. This question asks you to use our model to predict the effects on our economy and predict what will happen in the future. Consider the two-period general equilibrium competitive model described in class. The original preference of a representative consumer is given by the following function, U(C,L) + BU(C', (') = y log C+ (1 - v) log l + Bly log C' + (1 - y) log l') (a) Draw the AS curve (output supply curve), and show how you construct this AS curve from the 2 labor supply and labor demand curves. (4 points) (b) Draw the AD curve (output demand curve), and show how you construct this AD curve from the Keyensian cross. (4 points) (c) In the current period, people are also afraid to go out to enjoy movie, spa, haircut, restaurants, etc. Effectively, the preference on current consumption is also lower U(C, l) + BU (C', (') = ſ log C + (1 - 7) log l + B(y log C' + (1 - y) log (') where <. Explain what happens to the AS and AD curves, how do they move? (10 points, simple justifications about your economic intuition would be fine – you do not need to rely on any algebra here.)