Question

This situation is not over, What of the economic changes and likely changes most worries you due to COVID-19 and why? What do you think can be done about it and why, remembering there are benefits and costs in most of the alternatives? Do you agree with the way Ohio is opening up? If so why? If not, why not?

Answer 1

Introduction

The COVID 19 Pandemic has caused some of the greatest concerns among economists that have ever existed post the Great Depression in the United States. It is estimated that the Fiscal Deficit of the country may reach 20 Trillion Dollars by 2020 end of fiscal year. An overall increase of 2 Trillion dollars since 2019. This is because the country remains shut and business owners are making huge losses on one hand due to which tax collections will decrease and on the other hand expenses are rising for the government.

The situation is far from over and the economic down turn needs to be analysed carefully and given due attention so as to overcome the issue in a better manner.

Economic Changes Likely: -

As a result of the lock down, numerous business owners are losing Millions of Dollars in total value as sales have dropped to all time low and interest payments are piling up.

The Aggregate demand or the overall demand for goods and services in the economy is declining fast. This has also changed the supply lines and companies have no other option but to reduce employment to curtail costs and to ensure that their profit levels can be maintained as far as possible.

The expected result is a fall in price levels and overall Gross Domestic Product of the United States. We may face a situation wherein the overall GDP may grow in negative numbers. This is being called as the greatest depression of all time.

The following graph will help you understand the points illustrated above even further.

Here we see, that the Gross Domestic Product has declined from Point Y to Y1 and the Initial Demand Curve has shifted reducing the Price from Point P to P1 the Aggregate Supply has also reduced from the intersection of P and Y to the intersection at P1 Y1 respectively.

What can be done to reduce the Impact?

In my opinion, the government is taking strict action to ensure that the economy can revive as and when it is opened for trade. Reduced Tax collections are a big concern, however so is maintaining employee health and overall productivity in the nation.

Accordingly, the government is actively participating in increasing the capital in the economy. This is done by investing actively in various sectors of the economy, reducing interest rates for commercial activity and providing tax relief to corporate houses to maintain employability.

The United States has also taken measures such as giving away loans to private players with a given employee strength to pay away their salaries. This can be repaid with delays and the interest rates are very low. It is seen as a measure to recreate employment in the economy.

Ohio Opening Up: -

The government of the day recognizes the fact, that you will ultimately have to open up the economy so that tax collections and aggregate demand do not suffer in the way and manner that they right now are.

For this, the economy is slowly and gradually opening up, and is leading the way forward in ensuring that the aggregate demand does not take such a big hit that it is impossible to recover.

Please feel free to ask your doubts in the comments section.