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Macroeconomics of a Lockdown

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A distinction must be drawn between two different kinds of contraction of the economy, one caused by the lockdown itself and the other, which comes after the lockdown, caused by the auto-deflation of demand to understand the macroeconomic consequence of the lockdown.

Many countries in the world had lockdowns in response to the coronavirus pandemic; India was one of them. The Indian lockdown, however, was different from that of every other country in at least two respects: first, it was far more draconian than elsewhere; and second, during the lockdown when millions of workers were thrown out of employment, the government did not come forward with any programme of universal cash assistance for the workers. The purpose of this article is to explore the macroeconomic consequences of a lockdown where no cash assistance is provided to workers thrown out of employment.

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Updated On : 21st Sep, 2020

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