The COVID-19 restrictions required firms (businesses) to increase spending on cleaning and QR code check-in compliance. Using the Aggregate Demand-Aggregate Supply model, explain the short and long-term effects on the equilibrium, inflation, and output of

The COVID-19 restrictions requiring firms to increase spending on cleaning and QR code check-in compliance would result in a decrease in short-term equilibrium output due to higher costs of production. This shift in the aggregate supply curve would cause an increase in the price level, leading to inflation in the short-run. However, in the long-run, the increased spending on cleaning and compliance measures could lead to greater confidence among consumers and an increase in consumption and investment, shifting the aggregate demand curve to the right. As a result, the equilibrium output level could be higher than the pre-COVID level, leading to an inclusive economic growth while inflationary pressures could be mitigated.