EconomicsSuppose that the effects of COVID-19 on the economy can be thought of as a permanent negative productivity shock, i.e., a permanent decrease of the production owing to lower total factor productivity.What does the model predict will happen to the following variables: (1) real interest rate, (2) real output), (3) real consumption, (4) real investment, (5) labor input? For each variable explain why COVID-19 would have the predicted effect.

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Answered: COVID-19 on the economy can be thought…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: An Introduction To Basic Macroeconomic Markets

Section: Chapter Questions

Problem 9CQ

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Economics

Suppose that the effects of COVID-19 on the economy can be thought of as a permanent negative productivity shock, i.e., a permanent decrease of the production owing to lower total factor productivity.
1. What does the model predict will happen to the following variables: (1) real interest rate, (2) real output), (3) real consumption, (4) real investment, (5) labor input? For each variable explain why COVID-19 would have the predicted effect.

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