Question

Question:

The economic shocks due to the current pandemic began with a supply-side contraction: businesses closed their doors and laid-off workers, leading to significant reductions in output and income. Use what means of analysis is at your disposal to explain what the consequences of such a shock are for financial and economic performance in the short run. Then consider the shock to be exacerbated by pessimism about the future, with government responses taking the form of debt-financed transfers. Explain some possible implications of this for financial market behavior during the recovery.

Answer 1

The economy is in major shocks due to current pandemic and yes it is true that there’s a big supply-side contraction many businesses are going to close their doors and laid off workers it means that there is totally shut down of new openings and reduction in the workforce.

The main reason of cutting of workforce is that there is drastic downfall in the productive activities and in the overall production in more than 60% industries and in this case the financial position and economical position is badly affected.

All the financial planning or not at all working and all the future plans are totally in a dilemma because the implementation is not possible in this type of pandemic.

The economical condition or also badly affected because the past analysis of all the economical policy never experienced this type of situation so the coming projects are not at all working if it will retain and sustain and will continue for a longer period of time then it is a major setback for all the economies in the world.

Every economy and every government is trying to give some support to the industries but the support is not a permanent solution everybody has to recover soon and they have to make a proper plan for the implementation .

The debt possibility to reframe the economic structure is a short-term solution to overcome this pandemic.

The various implications of this on the financial market behaviour is totally on certain financial market I try to recover from this situation but it is difficult to retain the stability so that’s the only reason every possibility from the side of government is implementing to give us support and growth to the financial market and that’s why the rule of government is really very important to sustain the trust of the investor in the economy.