Question

To complete this assignment, choose one of the THREE topics of your choice (see below), do a thorough research and analysis on the topic, write it up, and finally submit it as an attached document. 6. Here are the THREE topics and all you need is to pick the one that is of interest to you

: (i) China and the US have been in serious disputes and disagreements in areas of international trade and commerce. Present a background on the issue (how did this come about and the political positions on both countries), its macroeconomic consequences to both countries and perhaps the rest of the world. I cannot just tell you what to say or what to focus on in this issue, but it is important for you to be thorough. You put the paper together in your own creative manner because there is NO one way to present it. It is absolutely fine if you choose to incorporate graphs / diagrams to support your analysis. However, the paper will be graded on its thoroughness, contents, and logical analysis and it should be free from grammatical errors.

(ii) President Trump's policy and his insistence in building a wall along the borders of the United States and Mexico. Present a thorough background on the issue (how did this come about and the political positions on both countries, perhaps even the rest of the world). Any social / economic consequences on this issue. Again, it is up to you as far as how you want to present it but it is important to be complete and logical in your analysis. The paper will be graded on its thoroughness, contents, and logical analysis and it should be free from grammatical errors.

(iii) The impacts of novel Coronavirus pandemic on the US economy have been devastating. Present a thorough analysis on its impacts since March 2020 up until perhaps the first part of October 2020, primarily focusing on the areas of personal consumption, business investment, unemployment, inflation, GDP, international trade, etc. Be sure to support your analysis with relevant data instead of presenting your personal opinions. Like the requirements of the other two options, it is up to you as far as how you want to present it but it is important to be complete and logical in your analysis.

The paper will be graded on its thoroughness, contents, and logical analysis and it should be free from grammatical errors. The paper should be between 4 and 5 pages in length, typed, double-spaced, and, again

Answer 1

3)COVID19 has induced a supply shock and the prolonged duration of the pandemic has put the economies into a demand shock. The shutdown of international and domestic trade and production sectors has hampered the supply side whereas social distancing and lockdown have hampered demand-side factors. The fall in demand and supply has induced increased unemployment and decreased the GDP. COVID -19 unlike the 1980 or 2008 recession is a crisis based on human behavior and choices and not financial speculation. If we take the example of the US the growth in the first quarter of 2020 went into a negative of 5% and around 33 million had filed for unemployment benefits. The second quarter was, even more, devastating with the number increasing to 50 million filings for unemployment benefits and GDP falling to 31.7%. With an increase in unemployment and pay cuts in major sectors the demand and purchasing power have fallen drastically affecting the production sector directly.

The majority of the unemployed are below 30 years of age and increased unemployment has been seen predominantly in retail and food industries highlighting that the hit of this pandemic induced recession is on the younger generation or the millennials. The impact is higher on adult women and also Hispanics where around 61% of Hispanic households have lost their income followed by 43% of blacks.The people employed have had reduced hours of work hence pay cuts. The reduced purchasing power deteriorates demand and hence supply that is why firms which shut temporarily, re-opened have now been permanently closed.

The US oil market was flourishing but the pandemic induced shock led to a collapse of the oil prices pushing down the price to $24 a barrel and also induced a price war between Russia and Saudi Arabia. The global oil demand is estimated to fall by around 10 % that is from 99.9million BPD to 90 million BPD. The major reduction in demand for oil is due to a fall in airline turbines and vehicle fuel. Small businesses have been affected as not only are they having a shortage but also a fall in demand.

The pandemic has altered or caused many shifts in our lifestyle for instance the food we eat or how it is currently produced. Restaurants are shut in many places and supermarkets are out of stock as the supply chain has been hampered. The shutting down of major meat processing units in the US has led to a shortage and scarcity of meat. For instance, one of the largest meat processing units the Smithfield Food had around 900 positive cases hence had to temporarily shut down service. Due to this shortage, some of the supermarkets in the US have limited the purchase of meat items to just three per person. Also, the closure of these meat units has led to an increase in the price of meat and dairy products as scarcity leads to a fall in supply and a rise in prices. Owners of slaughterhouses are in a dilemma as due to the financial hit many of these houses or farms will get permanently closed.

The COVID-19 induced recession has impacted not only farmers, retailers, and meat units but has also affected the seafood industry drastically. The seafood industry due to the pandemic has been facing challenges that revolve around logistics, change in consumer demand, transportation, border closure, and therefore shut down of operations. The closure of trade, firms, restaurants led to a stop in fish farming and also seafood operations. 2/3rd of US salmon is exported out of which 1/3rd is to China and due to the closure of trade the export revenue of seafood has declined. Seafood was consumed mainly in restaurants but the lockdown and social distancing policy has hampered the sales of hotels and restaurants. According to the seafood source, the price of lobster fell to $2 to $4 a pound with the closure of restaurants and also a lack of demand. The seafood industry faces not only the demand crunch but also supply uncertainty. There are fishermen who continue to fish whereas some have stopped as the cost incurred are higher than the profits and some have completely closed. It is not only salmon and lobster but also the sale of processed shrimp has declined drastically. According to Seafood company in Dulac, their sales had plummeted to about 90% since March 2020. The collapse has been seen not only on the seafood harvester or lobster harvester but also on the dealers, processors, and truckers who play a pivotal role.

With an increase in layoffs, unemployment, and pay cuts the demand and purchasing power has reached its low with people struggling to meet ends. Therefore, the government introduced the CARES Act through which $600 is being provided to the unemployed over and above the state unemployment benefits. The extra payment of $600 would definitely help the unemployed, self-employed, and gig workers to meet their daily needs but will it reduce the unemployment rate is the big question. Economists and Republican Senators have criticized this policy as a disincentive policy as it would encourage people to stay unemployed as through these payments, they are earning more than their regular income. The increase of cash in hand increases purchasing power hence stimulus to the economy and a positive impact on GDP (C+I+G+NX) based on past research on recessions. Whereas the current recession is not due to demand factors but majorly due to supply-side factors (closure of firms, restaurants, organization, and trade). Consumers are assumed not to be spending due to financial constrain but it is also due to the fact that they are unable to do so due to lockdown and quarantine policies hence hampering the consumption component of the GDP. Therefore, the package will stimulate the aggregate demand and may decrease unemployment but the magnitude of the impact is temporary, positive, and small.

The authorities should soon start building up the economy by focusing on domestic production and reducing the reliance on imports and by providing firms with fiscal packages and tax cuts. This package would induce firms to produce, innovate, and create hence increased demand which will directly improve employment hence positively affecting aggregate demand and supply. The economies due to past experience know how to deal with a fall in demand but the current situation is a fall in supply. Hence the long-term impact of COVID on the economies and unemployment will depend on the policies implemented and regulations during the phased opening up as economies.