Question

In our current pandemic situation, how will the decline in GDP, the rise in unemployment, and low interest rates affect federal, state, and local governments?

Answer 1

The Coronavirus pandemic is considered to be costly to any economy.
According to the Congressional Budget Office (2020) report, the economy is heading towards recession because it is estimated that the Gross Domestic Product will decline by more than 7 per cent, which could even worsen if there is no output. Declining GDP would decrease demand for goods, as there are less items available for purchase on the market. The fall in commodity demand would lead to a fall in money demand with a constant supply of capital. Due to the relationship between interest rates and real money, when there is less demand, the interest rate will decline. The foreign exchange rates would also be influenced by this demand relation.

For all this occurring in the economy, industry will also take place and continue to mobilize its labor force, which will raise unemployment even higher than the recession of the economy of 2007. Company can not recover because there is less to borrow from the fund market. There are prospects for liquidity bubbles in the economy, as has been the case in some Asian economies.

The rate of employment is also projected to increase above 10% as more workers are eligible for unemployment benefits. When people are unemployed, they 're going to have less money with them and they're going to demand less. There is less money in circulation in the world, which would have a negative effect on the world with low GDP and low interest rates. As the stock market is shrinking, there will be less support and less creation of jobs. Public also spends a lot of GDP on public health care. The interest rate on treasury bills is also decreasing due to the behavior of the Federal Government and market conditions.

Governments at the federal, state , and local level need to handle it with available funds and think about other measures to cumber these economic effects. Since all of these have disastrous effects on the economy, the economy may emerge from this downward sprial by rising funding and restoring the economy in the coming quarters. Businesses will re-start high-level development and GDP will once again begin to improve. Eills, because there's no money supply from the hand.

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