Question

explain diagrammatically, If the current pandemic (corona) is a negetive demand side shock, how the economy enters the short run equilibrium and will transition back to long run equilibrium (explain movement of shift curve). list and discuss two basic cause of recession.

Answer 1

The consensus is that the coronavirus outbreak will cause a negative demand shock to the world economy, by forcing factories to shut down and disrupting global supply chains.

A recession is a decline of economic activity, more specifically, a decline in gross domestic product (GDP) for twoor more consecutive quarters. Factors that cause a recession include high interest rates, reduced consumer confidence, and reduced real wages