Question

Go through any daily paper or digital newspaper and find one news item related to international economics, in general, or international trade, in particular.

Discuss the importance or effect of this problem on the U.S. economy, and to you personally.

Answer 1

Introduction

The last 6 months or so have been extremely tough for the global economy in terms of trade volumes as well as general state of the economy. This is primarily due to the fact that the Covid 19 crisis has caused deep concerns among consumers as well as producers alike.

Governments on their part have restricted movement of people from one place to another just to contain the disease as much as possible.

Therefore, the resultant of this is that all recent media articles are focusing towards the Pandemic and its net effect on the United States Economy with the Gross Domestic Product Shrinking as much as 30% in the last quarter so far.

The importance of this event on the general health of the US Economy, and us on a personal level is as follows: -

Case Details: -

Impact on the economy.

News Articles & Government Data readily available has also stated that the gross domestic product of the country has gone down as much as 30% in the last quarter. This means that the aggregate or total demand for goods and services within the country is falling sharply.

The end result of this is that producers are making significant losses and are unable to make their ends meet. As this happens, unemployment in the economy rises sharply and has been one of the top reasons why world economist is worried about the state of the US economy.

The country is in a state of deep recession wherein significant government intervention and that of the Central Bank or the Federal Reserve is required to bring the country out and to bring back any investment into the country.

The net effect is such that unemployment levels are on its peak in the country and was as much as 13% in May 2020. Since then even though some significant moves have been taken by the government for example tax deductions and grants to the poor people, yet its impact has been deep wherein everyone has felt the burden of reduced income, payments in terms of salaries as well as profits. Markets remain aloof as people stick to their homes, and the volume of international trade has also gone down significantly as across the globe, countries are fighting the disease as well as its economic implications.

Impact on us on an Individual Level: -

At an individual level, as the GDP declines, so does our ability to consume goods and services. This is because producers do not make significant profits enough to keep current workers, let alone additional ones. The decline of 30% in terms of the GDP which is the value of final goods and services in the economy indicates that the markets are unable to generate demand and income levels therefore remain low.

Thus, at a personal level this will have two major impacts.

1) Our income levels would fall significantly considering that the overall industry would not be able to provide salary levels as they previously would or we would remain unemployed due to shortage of work.  

2) Our chances to get employment and our choices and consumer behaviour would see a large impact wherein we may not be able to get employed and accordingly our choices of goods and services would change.

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