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The COVID-19 pandemic and the US-China trade tension have caused a significant decrease in China's demand...

The COVID-19 pandemic and the US-China trade tension have caused a significant decrease in China's demand for US exports.

1. Graphically show the likely short-run impact on US GDP and aggregate price level using the AD/AS model. Explain your prediction. HINT: Which curve in the AD/AS model would a change in US exports affect? [6 points = graph, 3 points explanation]

2. What is the anticipated result in US employment level? Explain [2 points]

3. What is the anticipated result in US inflation rate? Explain. [2 points]

4. The US-China trade tension was partly caused by the US imposing tariffs on Chinese imports. Do you agree with this economic policy? Explain your answer. [2 points]

5. With lockdowns during the pandemic, crude oil (a key input) price has fallen due to weak demand. How would the fall in oil price impact aggregate supply, real GDP and aggregate price level in the US? Show this in a AD/AS model and explain. [5 points = graph, 2 points = explanation]

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