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In: Economics

The Impact of the Corona Virus (COVID - 19) on the World Economy: (1) Can It...

The Impact of the Corona Virus (COVID - 19) on the World Economy:

(1) Can It Cause a Global Economic Recession?

(2) How is COVID-19 Affecting the Supply Chain and International Trade?

  


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Expert Solution

Impact of covid 19 on the world economy.

1. Covid 19 causes recession in the economy. Now the question how covid 19 causes recession. As we Covid 19 spread all over the world almost every country on this earth. To stop corona virus further most of the countries doing complete or partial lockdown. The countries like Italy, frace, India etc. had done lockdown for more than a month. Now due to this lockdown the Aggregate demand of all over the world hit hard and starts fall down. As we seen all the manufacturing sector like automobile, real estate sector are completely shutdown there is almost no production all over the world or we can say that very miniscule production was done. Now if we talk about the consumers we see than consumers are purchasing only those products which are necessary for life, nobody now focusing on luxury goods like gold, cars, even houses, so the consumption of the consumer fall due which we can say that Aggregate demand in the market also falls at a very fast rate and it causes recession in the market.

2. Due to covid 19 we see that it affect negatively the whole supply chain and international trade. If we talk about the international trade, all the countries in the world are trade only those goods which are needed at this difficult time. The countries trade only foodgrains, medical equipments and medicies etc. The trade of other goods and services like cloths, iron and steel, automobile products are complete stop because no body demand this goods.

If we talk about the supply chain within the country, we see that it also disrupted, all the food producing or processing firm are stop working because of lockdown due to which buffer stock and inventory reduces day by day. The countries which are depends on the other countries for foodrains and necessary products are hit hard because import of those countries are disrupted. On the consumer side, hoarding of essential commodities and medicies led to unusal stress on the supply chains, this happen because most of consumer get panic. So we can say that due to covid 19 both international trade and supply chain hit hard and totally disruptive.


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