Question

Imagine you are an economic analyst working at one of the major Chartered banks and you are asked to write a policy brief for one of the board members (highly educated people with some economic background, but not necessarily economists). In this policy brief, you should explain and critically analyse the short-run and long-run implications of coronavirus on economic growth by reviewing your lecture notes (AD/AS model and the Solow growth model). In your policy paper, you should include a clear title that reflects your key points. The body of your paper must explain in complete sentences and logically ordered paragraphs with a heading for each: 1. The short-run effects of coronavirus, and how can the government mitigate these effects? 2. The long-run effects of coronavirus, and how can the government mitigate these effects?

Answer 1

Question: 1

Solution:

POLICY PAPER

EXPLANATION OF SHORT RUN EFFECT OF CORONOVIRUS

The virus has been effected economies drastically as over 95000 and 3200 deaths have been recorded at global level. As per latest data, global economy would not be grown more than 2.9%.    The international institutions like World Bank have given aid of US $ 12 billion and IMF $ 50 billion for COVID-19. To protect the mankind from this type of EPIDEMIC DISASTER, different nations Govt. has opened their disaster relief funds and allocated to agencies.

SHORT RUN IMPLICATIONS OF CORONOVIRUS ON ECONOMIC GROWTH

The following short run implications can be easily seen in countries

1. Avoidance to Travel by the passengers from one nation to another

2. Flights are getting grounded

3. Avoidance to hanging out to malls, Market, Restaurants

4. Decrease in the demand of consumer goods from market

5. Avoidance to move by the audience to workshops and seminars etc.

6. Restrictions made on import/export from effected nations

7. High cost of preventive measures as N95 mask cost is INR 500-2500 in the market. So, out of reach from poor sections to prevent

8. Non availability of sanitizer in the market for preventive measure

Thus, due to all these short run effects the negative multiplier will generate at each level of the economy due to which health, income, investment, consumptions level will be decreased in short run and make the drastically effect in long run for global economy.

HOW CAN THE GOVT. MITIGATES THESE EFFECTS

At global level, every economy should focus to prevent from this epidemic disaster by adopting the mitigation measures for highly affected areas.

• Firstly, need of service provider (Doctors, health workers etc.) to high probability of getting affected people like lower income group as they have completion to go outside for their livelihood to the open environment. So, these groups are highly exposed to diseases.
• Secondly, financial and innovative way to help like health loan facilities to the poorer section of the society
• Thirdly, disaster relief fund could be activated for prevention
• Fourth, Awareness camp for the public at local level
• Fifth, precaution for contacting the spread from one to another person
• Sixth, avoidance or ban for mass congregation to crowded place up to short period
• Seventh, to avoid the supply chain scarcity, provide the availability of preventive products easily and cheaply to the people of the nation

Qusetion: 2

Solution:

POLICY PAPER

LONG RUN IMPLICATIONS OF CORONOVIRUS ON ECONOMIC GROWTH

1. · Market failure
2. · Increase in govt. expenditure will generate huge financial burden
3. · Lower the Health index or Loss of manpower to the economy
4. · Crash of share markets
5. · Reduction in imports/exports ultimately reduce the foreign exchange
6. All these are the generator of vicious circle of demand & supply side and will have negative effect on the economy to the reduction in the consumer goods.

HOW CAN THE GOVT. MITIGATES THESE EFFECTS

1. Identified the effected areas
2. easily availability of medicines
3. make balance between demand and supply of goods