A small business owner has lost a substantial part of her
business’s revenue due to the COVID-19 pandemic. From a
macroeconomist’s perspective, this person is acting both as a
household that contributes to GDP through consumption (since she
receives the firm’s profits as income) and as a firm that
contributes to GDP through investment.
A Small Business Owner Has Lost A Substantial Part Of Her Business S Revenue Due To The Covid 19 Pandemic From A Macroe 1 (66.26 KiB) Viewed 34 times
3. A small business owner has lost a substantial part of her business's revenue due to the COVID-19 pandemic. From a macroeconomist's perspective, this person is acting both as a household that contributes to GDP through consumption (since she receives the firm's profits as income) and as a firm that contributes to GDP through investment (2 points) Describe how (1) saving and (2) co-insurance, could help her smooth her household consumption. a. b. (2 points) The Federal Reserve has reduced the interest rate at which it lends to commercial banks (the federal funds rate) to nearly 0%. Explain, with specific reference to the credit market model in Unit 10, how this lower interest rate could help our small business owner smooth her household consumption. (2 points) Now think of the small business owner in her role as a firm making investment decisions. Will her firm's investment be likely drop by the same percentage as her household's consumption? o It will fall by a greater percentage o It will fall by the same percentage o It will fall by a lesser percentage (1 point) Explain.
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