Assignment about Novel Covid-19

Running head: COVID-19
COVID-19
Name of the Student
Name of the University
Authors note

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COVID-19
Introduction
Novel COVID-19, the current problem with which the entire global is fighting. The
virus which is killing thousands of people around the world; nevertheless, this respiratory
virus has severely crippled countries' economy as well.
Discussion
Pandemic Effects on Canada's GDP and Growth Rate
Almost all countries have become the victim of the novel Coronavirus; thus, the
economic crisis has emerged. Among infected countries, Canada is the one. Canada's GDP
and growth have been decreased considerably, and it is expected to decline even more. The
reasons behind the crippling economy are reduction in trade with countries, especially with
China, a decline in Air transportation as travel and material distribution has been ceased, and
so on. Thereby, from example is quite apparent how CODVID-19 causing the decline in the
country's GDP and Growth. Additionally, in Quarantine, the country will face critical
situations in terms of the economy(Jandoc, Mendoza and Quimbo).
Pandemic Effects on Canada's Interest Rates
Due to Quarantine, work in industries has been ceased; however, still, the government
had made of the decision of paying wages to employees. Hence, loans have been provided to
businesses with zero interest rates. So, employers can provide wages, and employees can
fulfill their basic needs. As a result of the COVID-19 virus, the interest rate in Canada has
reached zero to aid small and medium-sized businesses.
Pandemic Effects on Canada's Inflation Rate and Bank of Canada should take steps to
maintain their core values
CODVID-19 virus has imposed effects on each economic area, as nowadays, the
demand for fuels has been decreased; thus, to maintain the economy, prices of food items are
touching the sky. Similarly, in Canada, the inflation rate has been rose by 0.1 percent for
essential items in February. However, it is noted that the cost of digital products and services
is dropping. The Bank of Canada decided to set the rate of inflation at the mid-point of the
inflation-control range (1 to 3 %), i.e., 2 % (Ozili and Arun ).
Pandemic Effects on Unemployment

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COVID-19
This new outbreak can be proven far time similar to curse for fresh graduates as long-
life penalties can be faced. With this unemployment rate has been increased, in Canada's
well-known province, Alberta, a 9.5 % increase in the unemployment rate has been
concluded. However, the government is taking all possible measures to avail its residents.
Pandemic Effects on Nominal Exchange Rate
Furthermore, Canada's dollar is also under pressure, mainly due to suppressed prices
of oil. In March 2020, the British dollar has been soared by around 2% against the Canadian
dollar. And in my opinion, the Canadian dollar will slump more and more because Canada is
the fourth-largest oil producer and exporter in the world. Her economy mainly lies in the
prices of oil.
Classical and Keynesian Theory
Considering Keynesian Economic theory and consequences of novel COVID-19, they
both are comparable. Keynesian brought new theory as a result of lower output and increased
unemployment (Classical theory), and this is what COVID-19 is resulting in. According to
Keynes, rather than cutting spending on welfare and raising taxes to maintain economic
shock, the government should undertake spending of deficit so that customers' demand and
employment rate can be enhanced. In the first scenario, if the government will impose
pressure on residents in terms of taxes, then people will never come forward in stabilizing the
economy of the company, and real and nominal variables will remain unrecovered. Whereas,
the second scenario will work as an incentive for people, and they make their necessary
contributions(Schleich).
Critical Situation, Short-Run Equilibrium & Long-Run Equilibrium
If it is assumed that the outbreak is causing AD and SRAS, the short-run equilibrium
model can be utilized to maintain demand and supply by varying prices. Short-rum
equilibrium is an intersection point of demand, and supply means supply is equal to demand.
Whenever, demand and supply vary according to situations, price is slumped and soared to
reach short-run equilibrium. Economic shock barely remains for a period, not always. Thus,
in that period, prices should be decreased so that basic needs can be satisfied. Then, after the
end of the disaster, by increasing inflation rate and prices (Supply-side Adjustment
Mechanism), the economy can be brought back to a stable position.

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Canadian Government and Bank of Canada's Actions in COVID-19 Situation
Sources: (Djalante, Shaw and DeWit)
Because of the novel COVID-19, currently, the aggregate demand (AD) is low; thus,
the government of Canada has reduced the prices of items to sell the generated supply. For
instance, there is a massive production of oil in Canada, and due to Coronavirus,
transportation, and other trades have been closed to control the spread of the respiratory virus.
Thereby, the oil price has reduced because demand is low. Besides, the government is
following the theory of Keynes. Moving ahead, Bank of Canada has set inflation rate to 2 %
as currently there is a need for loans (demand is higher), but for the well-being of people,
Bank set inflation middle to the range, not higher, not lower.
Conclusion
In a nutshell, the novel CODVID-19 is not merely deteriorating human lives;
however, the economy also has been tremendously affected in several ways. Canada is
fighting for both lives of humans and the Great Depression.

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References
Djalante, Riyanti, Rajib Shaw, and Andrew DeWit. "Building resilience against biological
hazards and pandemics: COVID-19 and its implications for the Sendai
Framework." Progress in Disaster Science (2020): 100080.
Jandoc, Karl, Adrian Mendoza, and Stella Luz Quimbo. "(DP 2020-01) Vulnerable to the
Virus: Globally-Oriented Manufacturing Firms at Risk From the Spread of COVID-
19." UPSE Discussion Papers (2020).
Ozili, Peterson K., and Thankom Arun. "Spillover of COVID-19: impact on the Global
Economy." Available at SSRN 3562570 (2020).
Schleich, Taylor. "Policy Update–Taking stock of the Canadian policy
response." Policy (2020).