Practice

Free response question

Macroeconomics · Hard · 30 marks

IEO past paper: 2020 International Economics Olympiad, open questions

In this task, please answer the following questions related to the economic and econometric aspects of the COVID-19 pandemic.

(a)When fighting an "ordinary" recession, it is sufficient for the government to pay out transfers to households only. However, in the current recession, transfers to firms (or tax cuts for them) are also required. Explain why.[10](b)In the first weeks of the epidemic in Europe, there was a dramatic surge in demand for essential goods like toilet paper. Usually, a substantial rise in demand for a particular product leads to a corresponding increase in the producer's stock price. However, the stock prices of major toilet paper producers rose little, if at all. Explain why.[10](c)Measuring even a seemingly "simple" quantity like the number of COVID-19 deaths is not simple. A substantial number of cases may fail to be counted, and the deaths may be erroneously attributed to something else. Some people argue that measuring so-called excess mortality, i.e., the difference between the total number of deaths in a certain period of 2020, and the total number of deaths in the same period of a previous year, may help. Researchers found (Ciminelli and Garcia-Mandicó, 2020) that excess mortality in Italy in March 2020 relative to March 2019 is roughly twice the reported number of COVID-19 deaths. Does this imply that the reported number of people who died from the COVID-19 disease really underestimates the actual number by a factor of 2? Why?[10]

Up to 5 AI marks a day. The mark scheme is shown after marking.

Report a mistake