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Economics of Pandemics ECON 3201A ASSIGNMENT 2 Instructions: 1

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Economics of Pandemics ECON 3201A ASSIGNMENT 2

Instructions:

1. You must follow the instructions exactly as described below for completing and submitting your work on cuLearn. Hand written parts of the answers should be legible. Please put page numbers on your answer sheets and scan them into a pdf. You may use Word or another word processing software. I find the ‘Scannable app’, which is free, convenient for scanning documents.

2. Your work must be submitted to the ‘Assignment 1’ folder under the ‘Assignment’ section of the course page on cuLearn. Your work must be submitted as a single file in .pdf format. The file should be named as follows: Lastname-A2.pdf

3. Points correlate with the degree of clarity, quality, and completeness of your answers.

Question 1: 40 points, 200-250 words

Consider a Susceptible-Infected-Recovered (SIR)-model discussed in the lectures. Briefly explain the terms the ‘Basic Reproduction Number’, R0, and the ‘Effective Reproduction Number, R(t). What useful information do they provide about the pandemic? Consider an economy under a pandemic where there remains a very large susceptible population, S. Clearly explain how each of the following two scenarios (i) public health measures (e.g. mitigation and suppression strategies) and (ii) a sudden arrival of an effective vaccine or an effective anti-viral medication is likely to affect R(t). In light of your response, briefly comment on the particular ongoing challenge in affecting the value of R(t) in Canada.

Question 2: 40 points, 200-250 words

Provide an argument that justifies the ‘COVID-shock’ as a ‘demand’ shock. Provide an argument that justifies the ‘COVID-shock’ as a ‘supply’ shock. Suppose that you have data available on aggregate output (also referred to as the Gross Domestic Product (GDP)) and the aggregate price level, P, for the months following the COVID shock in March 2020. What association between these two might reveal that the COVID-shock is a predominantly a demand shock or predominantly a supply shock? Explain clearly. Please use free-hand sketched and labeled demand-supply diagrams similar to those shown in the lecture notes to support your responses to both parts of the question.

Question 3: 20 points, 100-125 words

The second quarter of 2020 (i.e., the months of April, May, June) saw the deepest recession in the Canadian economy in terms of contraction in economic activity and employment. In your view, which recovery path for output and employment from the following set of possibilities is the economy likely to take over the next year or so:

V-shaped, U-shaped, L-shaped, W-shaped, K-shaped

Please pick only one and justify your reasoning. Points will be awarded based only on the quality of reasoning.