This question asks you about the macroeconomic effects of the Covid-19 pandemic.

a.The amount of GDP we would like to have is YSafe (which may be less than normal output, Y*, because of the public health

consequences of producing our usual level of output), and our actual level of output is Y (which may be less than normal output, Y*, because of the impact of the pandemic on planned spending). Give an example of a possible development related to the pandemic that would be likely to have a substantial impact on Y with little impact on life.

b. there are possible long-run consequences of the pandemic on the determinants of potential output per person. How and why might the pandemic affect the normal employment-to-population ratio (N*/POP), and what would be the consequence of those developments on potential output per person (Y*/POP)?