Question

Use the AD-AS model and neoclassical growth model to explain how the Covid-19 pandemic affects the demand and supply side of the Germany.

Answer 1

Covid19 pandemics has caused massive lockdown in Germany which has forced many businesses to incurr losses and thus have shutdown forcing them to layoff which led to unemployment numbers rising exponentially. This causes national income and disposable incomes to reduce, and thus personal consumption declines which leads to aggregate demand curve shifting leftwards in short run ajd hence the real GDP declines alongwith inflation. The Aggregate supply curve too shifts leftwards.

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