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Using the AD-AS model (short-run and long-run AS) and the Aggregate Expenditure (AE) model and...

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Accounting

Using the AD-AS model (short-run and long-run AS) and the Aggregate Expenditure (AE) model and assuming the Singapore economy was at the natural rate of output at the onset of the crisis:

  • Illustrate the impact of the crisis on the domestic economy using both the AD-AS model and the AE model. Ensure you clearly label all parts of the diagram, clearly demonstrating the original equilibrium and the COVID-19 outcome equilibrium.
  • Discuss your rationale for the outcome you have demonstrated in your diagrams, ie discuss which components of AD/AS/AE have been affected and why - the basis of the shifts you demonstrated in the diagrams.

The 2 models you have used have different underlying assumptions.

  • Outline the major underlying difference(s) between the two models.
  • Briefly discuss and illustrate how the how the difference(s) in the model assumptions impact the degree of the potential impact on the economy. Use the AD-AS Model and provide ONE diagram to illustrate the potential difference in outcomes depending on the assumptions made. (Hint - consider the assumptions underlying the AE model - what SRAS curve reflects this?)

PLEASE ANSWER THE LAST TWO BULLET POINTS(IN BOLD).

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