Question

Individual Assignment - microeconomics You will construct a report of 2000 words on any economic issue of your choice. (Eg; Inflation in Zimbabwe, Impact of Covid 19 etc). Your report should include 4 academic sources pertaining to the issue you have selected. Your report should entail the following Cover page • Table of content • Executive summary • Introduction of the issue • Discussion of the issue o Academic source 1 Academic source 2 Academic source 3 o Academic source 4 • Recommendations of the issue How to solve the issue o Action plan Resources required . Conclusion Your report will be submitted under the following requirements .PDF format word count - 2000 words . Font - Times new roman • Font size 12, Heading 14

Answer 1

Impact of COVID on the Economies

Recession theoretically revolved around the instability of the banking or financial sector whereas the current downturn is a result of a conscious decision taken by authorities to contain the health crisis. This crisis is not based on financial speculation but human behaviour and choices.Unlike the past recession which impacted aggregate demand first, the pandemic led to complete shutdown of industries and  firms inducing an economy into supply shock hence the prolonged duration of the shut down put the economy into demand shock. The authorities are aware of how to deal with demand shock but that is not the case with supply deficiency.The lockdown led to increased unemployment around the world .Oil , airline and small businesses were the first to be impacted.

The US till recently was having a 3.4% unemployment which was a 50 year low but the shutdown led to increased unemployment and as per reports around 33 million had filed for unemployment benefits till recently.Majority of the unemployed are below 30 years of age and this is has been seen predominantly in retail and food industries .The impact is higher on adult women as 40% of women are working in high risk sectors. Even the once employed have had cut in hours and wages. This hit has been predominantly on Hispanics where around 61% of Hispanic households have lost their income followed by 43% of blacks.

Due to the lockdown and restricted movement the need for oil has reduced drastically hence affecting the supplier of oil like Saudi whose main revenue was from the export of oil. Hence creating a surplus and the global oil demand is estimated to fall by around 10 % that is from 99.9million BPD to 90 million BPD. The major reduction in demand is due to fall in airline turbine and vehicle fuel.The US oil market was flourishing but the pandemic induced supply and demand shock led to a collapse of the oil prices. The demand for oil reduced pushing down the price to $24 a barrel. Small business, have been affected as not only are they having a shortage but also a fall in demand.

India , being a developing country with the second largest population was the most vulnerable hence took steps like closing down borders for trade, with certain exceptions for pharmaceuticals. It also had a complete lockdown in the country for 21 days extended to a month plus, but the lockdown was done in phases so that the effect on human behavior is not altogether .The government provided a list of all essential items which are functioning like online services for grocery so that people did not have to step out of their homes for purchase.The state government provided free rations to houses and especially elderly (It consisted of rice, pulses, sugar, and certain essentials).The government started an app that has every citizen enrolled and that app tracks down a person's travel history in the last couple of days and also if he /she is living in a red zone of the virus. This helped citizens  to be aware and take precautions. This helped the government too as they are able to track down positive virus cases.The governement tried to mitigate the effect but the negative implication of the lockdown policy was seen on the migrant workers who were left homeless and poverty-stricken due to no wage and no travel as India has a high number of daily wage workers who have migrated from different parts. This led to an exodus of daily wage workers to bus stations and railways station .Some migrant workers even started walking down to their home which was nearly 600 to 800 km. The government should have given a certain notice period so that the migrant workers could have traveled back.  WHO and other international organizations have praised India for its mitigation and adaptation strategies which have become a model for certain other economies.

Industries that have thrived are online shopping,online tutoring and app companies as due to the restricted movement people ended up at home hence increased use of technology and phone. Today majority in India purchase from online groups like Big basket, Flipkart and Amazon who have recently even started providing essential commodities and groceries.

The federal is providing benefits of $600 as weekly benefits in the US but this not enough to ensure the economy gets back on the road .The authorities should focus on domestic production and reducing the reliance on imports and by providing firms with fiscal packages and tax cuts. This package would induce firms to produce, invent and create hence increased employment which will induce demand.Hence the long term impact of COVID on the economies and unemployment will depend on the policies implemented and regulations during the phased opening up as economies.