Question

In: Economics

2) Explain and DISCUSS the effect of COVID 19 to Australia economy and how it has...

2) Explain and DISCUSS the effect of COVID 19 to Australia economy and how it has change the current trend in ECONOMIC growth, GDP, inflation rate, unemployment rate, government debt and other macroeconomic indicators using multiple sources including using RBA bank resources

Solutions

Expert Solution

Covid19 pandemics has caused massive lockdown in Australia which has forced many businesses to incurr losses and thus have shutdown forcing them to layoff which led to unemployment numbers rising exponentially. This causes national income and disposable incomes to reduce, and thus personal consumption declines which leads to aggregate demand curve shifting leftwards in short run ajd hence the real GDP declines alongwith inflation. The Aggregate supply curve too shifts leftwards.

Due to sharp decline in prices and real GDP, the government comes up with fiscal stimulus and structural reforms which leads to rising government debt and fiscal deficit as taxes are cut and spending is ramped up. Also we see exchange rate devaluation due to pandemic as exports shrink drastically and leading to higher teade deficit and current account deficit. This leads to reduction in sovereignty rating for Australian economy.

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