Question

assume that you have been hired as a consultant for the World Bank to prepare a Witten report on the macroeconomic impact of COVID-19 on a chosen country. The report should include the following:

a) What are the macroeconomic effect of Covid-19?

b) What are the proposed solution to address the macroeconomic impacts identified in (a)?

c) In your opinion, what are the challenges to overcome this problem from a macroeconomic perspective?

d) What is the impact of the policy response in the short-run and long-run?

Answer 1

I have been hired as a consultant for the World bank to prepare a written report on the macroeconomic impact of COVID-19 on USA.

a) The macroeconomic effect of Covid-19 has been a severe dent in the GDP of USA in the 1st and 2nd quarter, several industries laying off employees and businesses going bankrupt.

b) The proposed solutions are increase in government spending, social benefit transfers and making cheap loans accessible to the industry so that liquidity is abundant.

c) The challenges are that government themselves don't have the money to spend as their tax revenues have been impacted because of the lockdown, plus a higher increase in government debt levels if it borrows more could pose a greater risk on the finances of the government.

d) In the short-run if the government spends, the consumption power of people will increase wherein they will spend on much needed essential items, in the long run people will invest more once the economy starts to revive as the credit will be available at a cheaper rate.