Question

The global impact of COVID-19 is felt all over the world. This pandemic continues to impact us at the macro and micro level of economics. Since March of 2020 we've seen a dramatic decline of GDP in numerous countries. I would like for you to explain why our economy here in the USA has contracted. You should draw from the formula of GDP which includes consumption, investment, government spending, as well as net exports. Describe how at least two factors of GDP have been impacted and provide evidence to support your claim. Please use at least 250 characters.

Answer 1

Answer : As we all know GDP consist of 4 elements that is consumption , investment , government expenditure and net exports.

COVID situation cause hinderance in global transportation services as this disease spread fast within air. So in order to avoid effect of COVID transportation services were paused which stopped exports imports of USA. Exports of goods decreased $8.8 billion, crude oil decreased to $1 billion. Decrease in net exports reduced GDP.

Similarly COVID situation caused negative impact on health of human resource which made Production inefficient that resulted in low profits which discouraged people to do investments as low profits reflected low returns. Corporate profits were -12% and -10.2% in 1st and 2nd quarter of 2020 respectively.

Government expenditure was same as government did expenditure irrespective of income as government is backbone of economy so there was drastic rise in government spending in form of health services and subsidies to citizens of USA.

Consumption was more as compare to earlier as it was panic buying due to lockdowns and COVID situation. Consumption was rised.

But investments and net exports were low which were responsible for negative impact on GDP.

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