This research paper aims to study the impact of COVID-19 on the economy, where we have extended the standard epidemiological model, the Susceptible–Infected–Recovered (SIR) model. In the economy’s dynamics, we have incorporated aggregate demand and aggregate supply and further set up a system of three-dimensional nonlinear differential equations, which is more likely the Labor–Infected–Quarantine (LIQ) model, an extension of the SIR model. Here, we have derived the steady-state condition and analyzed the model’s stability. In addition, we have done a comparative static analysis of parameters with some policy implications. We aim to achieve the twin objective, i.e., controlling the pandemic and reviving the economy under the set of the policy mix.