Question

Many celebrated economists have likened the recent novel covid-19 pandemic to “the great depression” of the 1930s. One of the havocs this pandemic has caused is the general decline in the value of most stocks. As a student of corporate finance, what cardinal concept in finance will you attribute this

to and what are the critical issues involve in this concept.

Answer 1

The cardinal concept of finance, I will derive through this event is that the past events are reflective of the future reactions so there are lot of interlinkage between recession of 1930 and and impending recession of 2020 which could be summarised as follows-

A . 1930 economic crisis has a bigger repercussion on the overall economy at it lead to a civil war and this coronavirus crisis is just not limited to the economic crisis it is leading to killing a lot of people all across the clock as it is a health crisis

B. There is a culmination of long-term debt cycle as it is to be believed by various experts and it will lead to a highest degree of contagion in the overall economy.

C. There is downgrade on the part of the government debt as there are additional borrowings and the overall books of accounts of government has expanded severely

D. In both the cases, there is a lot of intervention by the Federal Reserve and the monetary policy are highly made to favour general public.

E. There is also a highest degree of intervention by the central government in order to curb the crisis in both the cases of 1930 and 2020.