Question

Explain and illustrate the impacts that the COVID-19 pandemic and horrendous bushfires of 2019/2020 have had on the Australian economy. You will do so by comparing the three main macro-economic indicators –GDP growth, inflation and unemployment – in June 2020 to a point in time prior to the pandemic and bushfires (pre-July 2019), then you will illustrate and explain the impacts using the AD-AS model. Provide references that support your work and submit your slides and a link to your video for marking.

Comparison: July 2018 and June 2020 GDP growth: September 2018 (2.6%) June 2020 (-6.3%) Inflation: September 2018 (1.9%) June 2020 (-0.3%) Unemployment rate: July 2018 (5.3%) June 2020 (7.4%)

Answer 1

Hi,

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Question:

Answer:

COVID-19 Pandemic:

This is global pandemic that taht has affected the world worst. The economy has shrunk sharply and the million of people have lost their jobs and thousands of people lost their lives. According to the modern economy decreasing AD rapidly is the reason of recession. When AD decrease its decrease output and price level. When price level increase its decrease production that decrease income level and unemployment. Decreasing income decrease AD further and the economy gets enters into the recession.

According to the data-

Comparison: July 2018 and June 2020

GDP growth: September 2018 (2.6%) June 2020 (-6.3%)

Inflation: September 2018 (1.9%) June 2020 (-0.3%)

Unemployment rate: July 2018 (5.3%) June 2020 (7.4%

So, yu can see how the GDP growth has decreased and decreasing price decrease inflation and the economy is facing the problem of deflation in June 2020. Unemployment have increased by more than 2%. So, overall economic has perform worst due to COVID-19 pandemic.

The same things happen in any disater like  bushfires. During the bushfire consumptions decrease due to supply distrubtion. Mostly the supply chain and distribution of goods and services affect the consumption level during these times. People lost their assets in a specific area and their wealth affect worst. So, these things decrease consumption and decreasing consumption decrease AD that decrease output and price level.

Graphical Representation:

You can see the economy is equilibrium at point E and decreasing AD shift AD curve left from AD to AD1 that decrease price and output level from P to P1 and Q to Q1 respectively.

Thanks