• First, sketch the long-run/short-run aggregate supply curves, LAS & SRAS, respectively, and the aggregate demand curve, AD, for the pre-pandemic economy. That is, show the long-run equilibrium in the absence of any shocks to the economy. Make sure to label the axis correctly.
• Second, show how the AS/AD curves shift due to the pandemic. Identify the type of shock as positive or negative.
• Third, show how the AS/AD curves shift due to the CARES Act.

Thus, you should have three figures: Fig. A Long-Term Equilibrium, Fig. B (Negative? /Positive?) Supply and Demand Shocks, Fig. C The Effect of Stabilization Policies.

Finally, discuss how the implemented stabilization policies (fiscal/monetary) helped during the economic downturn and what are some potential effects of the CARES Act on the price level as revealed by the AS/AD model.

The coronavirus pandemic has caused an unprecedented disruption to everyone's life on our planet. The virus has spread to almost every country, infecting more than 90 million people in the United States and 570 million around the world and it is still spreading at the time of this writing. Countries have taken significant measures not only to fight the spread of the coronavirus but also to alleviate the economic hardship brought on to individuals. In the U.S., during March 2020, states began to shut down to prevent the spread of Covid-19 virus. Schools, restaurants, and other businesses remained closed for an extended period of time. In response, the U.S. government signed a massive $2 trillion stimulus package, known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the biggest in American history. Concurrently, the central bank of the United States, known as the Federal Reserve, or the Fed, significantly increased its purchases of Treasury securities to provide liquidity and access to greater quantities of credit. The purpose of this assignment is to assess your ability to demonstrate an understanding of major economic events that have shaped the course of the U.S. economic history. We can look at the economic downturn of 2020 using the model of aggregate supply and aggregate demand (AS/AD). - First, sketch the long-run/short-run aggregate supply curves, LRAS \& SRAS, respectively, and the aggregate demand curve, AD, for the pre-pandemic economy. That is, show the long-run equilibrium in the absence of any shocks to the economy. Make sure to label the axis correctly. - Second, show how the AS/AD curves shift due to the pandemic. Identify the type of shock as positive or negative. - Third, show how the AS/AD curves shift due to the CARES Act. Thus, you should have three figures: Fig. A Long-Term Equilibrium, Fig. B (Negative? /Positive?) Supply and Demand Shocks, Fig. C The Effect of Stabilization Policies. - Finally, discuss how the implemented stabilization policies (fiscal/monetary) helped during the economic downturn and what are some potential effects of the CARES Act on the price level as revealed by the AS/AD model