ECS3709
ASSIGNMENT 3 SEMESTER 2 2024
UNIQUE NO.
DUE DATE: SEPTEMBER 2024
, ECS3709
Assignment 3 Semester 2 2024
Unique Number:
Due Date: September 2024
Applied Macroeconomics
Question 1
1. The AD-AS Model Overview
The AD-AS model is used to analyze macroeconomic conditions and how they are
affected by changes in aggregate demand (AD) and aggregate supply (AS). In this
context:
Aggregate Demand (AD) represents the total demand for goods and services in
an economy.
Aggregate Supply (AS) represents the total output of goods and services
produced by the economy at different price levels.
2. Temporary Demand Shock During COVID-19
The COVID-19 outbreak caused a sudden and significant reduction in demand due to
lockdowns, restrictions on businesses, and reduced consumer and investment
spending. This situation represents a negative demand shock. Since we assume no
government intervention or monetary policy response, the economy will have to adjust
naturally to the demand shock.
3. Graphical Illustration: AD-AS Model
The initial equilibrium is at the intersection of the AD curve and the short-run
aggregate supply (SRAS) curve, where the economy is producing at the full-
employment output level Y0Y_0Y0 and the price level is P0P_0P0.
ASSIGNMENT 3 SEMESTER 2 2024
UNIQUE NO.
DUE DATE: SEPTEMBER 2024
, ECS3709
Assignment 3 Semester 2 2024
Unique Number:
Due Date: September 2024
Applied Macroeconomics
Question 1
1. The AD-AS Model Overview
The AD-AS model is used to analyze macroeconomic conditions and how they are
affected by changes in aggregate demand (AD) and aggregate supply (AS). In this
context:
Aggregate Demand (AD) represents the total demand for goods and services in
an economy.
Aggregate Supply (AS) represents the total output of goods and services
produced by the economy at different price levels.
2. Temporary Demand Shock During COVID-19
The COVID-19 outbreak caused a sudden and significant reduction in demand due to
lockdowns, restrictions on businesses, and reduced consumer and investment
spending. This situation represents a negative demand shock. Since we assume no
government intervention or monetary policy response, the economy will have to adjust
naturally to the demand shock.
3. Graphical Illustration: AD-AS Model
The initial equilibrium is at the intersection of the AD curve and the short-run
aggregate supply (SRAS) curve, where the economy is producing at the full-
employment output level Y0Y_0Y0 and the price level is P0P_0P0.
