Question

Question No 1: (Marks 10)

The coronavirus (COVID-19) is affecting 210 countries and territories around the world. As of 12^th June 2020, in Oman 21,071 cases of COVID-19 have been reported, including 96 deaths. The coronavirus (COVID-19) outbreak is a major health crisis and disruptions to the global economy. The situation is getting severe due to lockdown as measure to contain the virus.

a).  You are required to use aggregate demand and aggregate supply analysis, explain in detail how COVID - 19 affect each component of aggregate demand and aggregate supply of Oman’s Economy. Remembers marks are allocated based on detail explanation and in text citations using APA style! Minimum ½ page.

                                                                                                                                     [Marks 4]

B. Draw diagram of aggregate demand and aggregate supply and explain the effects COVID -19 Oman’s Equilibrium real GDP and price level, unemployment and economic growth. Remembers marks are allocated based on detail explanation and in text citations using APA style! Minimum ½ page.

                                                                                                                                     [Marks 3]

A. Explain appropriate fiscal policy and monetary policy to combat the effects of COVID-19 on Oman’s economy. Remembers marks are allocated based on detail explanation and intext citations using APA style! Minimum ½ page.

                                                                                                                                         [Marks 3]

Question No 2: (Marks 10)

In 2008 the real per capita income in an industrially advanced Country A was about $37,665  

  per year.  The average real per capita income in low-income developing Country B was about $925 per year.

(a) What is the gap in the average standards of living between Country A and Country B based on their per capita income? Remembers marks are allocated based on detail explanation and intext citations using APA style! Minimum ½ page.

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b). If real per capita income of Country B is to grow at an average annual rate of 7 %, using the rule of 70 how many years it will take for this country to be classified as middle-income country. Evaluate the benefits of increase in real per capita on the country’s economic growth and standards of living. Remembers marks are allocated based on detail explanation and intext citations using APA style! Minimum ½ page.

                                                                                                                                         [Marks 3]

c). Assume the Country B has embraced globalization, discuss how the globalization promotes economic growth and development in low developed countries. Remembers marks are allocated based on detail explanation and intext citations using APA style! Minimum ½ page.

                                                                                                                                         

Answer 1

Answer 1)

Covid 19 has it influence on all the nations. Due to covid 19, people lost their lives. Toshield the lives of nation, lockdown has been imposed by nations.

Due to lockdown, there is complete recession in Oman. There is decrease in income , output and employment. Aggregate supply has decreased and due to decrease in supply, production has reduced, worker get unemployed and income has reduced. This also have impact on the aggregate demand. People have lost their belief in demand and consume less goods and services.

Due to decrease in aggregate demand, demand curve shifts backwards and due to decrease in aggregate supply , aggregate supply curve shift backwards . Due to that equilibrium price increases from p to p1 and equilibrium GDP reduced from Q to Q1. Due to decrease in real GDP unemployment in Oman increases and economic growth decrease

Take action by monetary and fiscal policy-

Fiscal policy used by fed is expansionary . Taxes are reduced and spending is increased. Due to that aggregate supply curve will shift rightwards and again full equilibrium will be attained. The reason is expansionary fiscal policy increase production and increase in production provides employment and employment leads to increase in income.

Expansionary monetary policy-discount rate is reduced and central bank buys government securities through open market operations. Increase money supply in banks. Interest rate falls and borrowing becomes cheaper. Investment increases. Increase in investment leads toward increase in production and increase in production provide employment and employment leads to increase in income.