Graph the 2020 Recession: The Coronavirus pandemic resulted in shocks to both the Short Run Aggregate Supply (SRAS) and Aggregate Demand. On the graph that you completed in #2 clearly illustrate the effects of the shocks to the economy through shifts in both the aggregate demand (AD) and the short run aggregate supply curve (SRAS) from the beginning of 2020 to the end of the recession in May 2020 during Q1 and Q2 of 2020. How much did real GDP (Links to an external site.) fall during the first two quarters of 2020? How big was the recessionary gap? What was the change to the price level (Links to an external site.) during the first two quarters of 2020?
Explain how and why the spread of the recession affected consumer and business investment spending. Which sectors of the economy and occupations were most affected? Be specific.
Hints: The LRAS (potential real GDP) didn’t change much during the recession, and you can assume that it is stable. There was a huge decrease in Aggregate Demand (leftward shift) and there was a supply shock which shifted the SRAS upward to some degree.
In the case of the Pandemic Recession, the National Bureau of Economic Research says (Links to an external site.): "The committee has determined that a trough in monthly economic activity occurred in the US economy in April 2020. The previous peak in economic activity occurred in February 2020. The recession lasted two months over two quarters, which makes it the shortest US recession on record." During the recession the AD curve shifted sharply to the left.
Explain how and why the spread of the recession affected consumer and business investment spending. Which sectors of the economy and occupations were most affected? Be specific.
Sources:
https://www.nber.org/news/business-cycle-dating-committee-announcement-june-8-2020
https://fred.stlouisfed.org/series/GDPC1/
https://fred.stlouisfed.org/series/GDPDEF/
