Analyse the effects of quarantine on GDP, employment and the unemployment rate.

During the current COVID-19 pandemic many countries have imposed quarantine on their
populations in order to limit/ stop the spread of the disease and avoid overload on the health
system. While these measures are justified from the health perspective, they have major economic
consequences. In this assignment you are asked to analyse different economic aspects related to the
COVID-19 pandemic.
Part 1 (20 marks)
GDP and unemployment
a) Analyse the effects of quarantine on GDP, employment and the unemployment rate. Which
industries are likely to be most affected and which industries are likely to be least affected
by quarantine measures?
b) Choose any country that introduced quarantine as an example. What was its GDP growth
rate in 2018, 2019? (Indicate the source of information.) Is this country likely to be in
recession this year? Refer to two definitions of recession.
c) Are your answers consistent with (general) Okun’s law?
Part 2 (20 marks)
Inflation
a) What do you think would happen to inflation in your chosen country in the coming year?
Explain.
Demand components: Consumption
b) What factors usually determine individual consumption? In light of these factors analyse
how the situation with the COVID-19 pandemic is likely to affect aggregate consumption.
Use the theory studied in the course in your answer. You may want to provide some
examples for your chosen country.

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