Impact of Global Lockdown and Pandemic on Aggregate Demand and Supply

This document discusses the impact of global lockdown and pandemic on aggregate demand and supply. It covers topics such as the decline in GDP, increase in unemployment rate, and expected recovery of durable and non-durable industries. The document also explores the consequences on the federal budget deficit.

BUSINESS

TABLE OF CONTENTS
QUESTION 1..................................................................................................................................3
QUESTION 2..................................................................................................................................3
QUESTION 3..................................................................................................................................3
QUESTION 4..................................................................................................................................4
QUESTION 5..................................................................................................................................4
QUESTION 6..................................................................................................................................4
QUESTION 7..................................................................................................................................5
REFERENCES................................................................................................................................6

QUESTION 1
a. Both aggregate demand and aggregate supply has seen a heavy decline due to global lockdown
and pandemic situation.
b. The price elasticity for essential goods is elastic as demand has increased more than prices.
c. Market has failed completely in terms of financial, political and economic context.
d. GDP is estimated to contract by $34.2 billion of 1.32% ((The possible economic consequences
of a novel coronavirus (COVID-19) pandemic, 2020)).
e. The durable industry despite being worst hit is expected to bounce back and the non durables
industry will continue to function as it is now but with better scale.
f. Labour force participation rate is expected to decrease as the labourers will retreat due to
Covid- 19 and consequently rate of unemployment will rise.
g. Federal budget is expected to be at an increased deficit than the expected one.
QUESTION 2
a. Annual wage rise in 2% means nominal income i.e. income that is not adjusted with the
inflation rate increases by 2%. This means union would have anticipated the change in inflation
rate to be less than 2% but the inflation rate must have risen unanticipated leading to loss in the
real income which is inflations adjusted income i.e. income after inflation (Ahmad and et.al.,
2020).
b. The inherent utility or value of the good that it is giving, and,
My income levels at present.
QUESTION 3
a. Labour participation rate indicates the rate at which employed or unemployed people are
actively participating in the employment of country (Rahman and Kuddus, 2020). Increase in the
unemployment rate by 0.2% indicates that total number of unemployed people looking for
employment. There is no error in the report.
b. Elimination of human travel agents due to technology disruption.
Language translators.
c. A 0% unemployment rate is unacceptable as it can create inflationary pressure, lower
technological advancement and bring redundancy in economy.
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QUESTION 4
a. Not necessarily. GDP refers to economic productivity but economic welfare inclines towards
the living standard of people within a country. GDP can be measured by fixed economic
measures and figures but economic welfare is wider taking into purview anything such as
literacy rate, number of doctors etc., and any factor that contributes in improvement of living
standard.
b. Human Development Index (HDI), and,
Social Progress Index (SPI)
QUESTION 5
a. It can be noted that Fred evidently stated that slowdown in economy has resulted in decreased
sale of durable goods as compared to the non- durable goods. This can be used to say that the
business cycle of the durable goods is comparatively much longer than that of the non- durable
goods (Girona, 2020). This further alludes to the point that the durable goods are currently at the
contraction stage but the recovery of the goods is estimated to be quicker. Fred ultimately means
that the overall profits that Flintstone is able to earn due to increased sale of durable goods is
beneficial due to them being necessity goods whereas cars are non durable goods and hence are
not in demand right now.
b. Gross Domestic Product i.e. GDP and the inflation rate in the country are the two critical
measures that can be adopted in order to predict the direction of economic growth or decline.
QUESTION 6
a. The sea shell money is no longer a valid exchange of medium where the shells cannot be
traded against the goods that represent certain value of money. This is because the shell money
does not effectively contribute in the GDP and cannot be taxed or included in the overall finance
or tax calculation as well (Barua, 2020). This is the reason they can no longer be considered as
money.
b. Interest rates directly affect the consumption in an economy where the consumers question
that whether they should save or spend. The decreased interest rate causes consumers to spend
more and the purchase of items like cars, houses etc., and increases.
The investment gets affected by the decreased interest rates negatively i.e. decrease in
investment rate causes decrease in the investment rate as well because rate of returns also decline
thus causing lesser profits.
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The decreased interest rates also affect the net exports of a country in a negative manner i.e.
decrease in interest rates causes the consumers to increase their sending n durable goods thus
stimulating the economy (Elman and et.al., 2020). The value of the currency automatically
improves and the exports ultimately decline and the imports increase in the economy..
QUESTION 7
a. Economic support payments will be given to pensioners, seniors, caretakers, students worth
$750 two times.
Corona virus supplement to jobseekers of $550 per fortnight for consecutive 6 months starting
form 27 April, 2020 will be given (The possible economic consequences of a novel coronavirus
(COVID-19) pandemic, 2020).
b. Wage subsidies have been allowed to employers.
Employer is entitled to receive minimum of $1500 every fortnight if they qualify for it.
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REFERENCES
Books and Journals
Ahmad, T., and et.al., 2020. Coronavirus Disease 2019 (COVID-19) Pandemic and Economic
Impact. Pakistan Journal of Medical Sciences, 36(COVID19-S4).
Barua, S., 2020. Understanding Coronanomics: The economic implications of the coronavirus
(COVID-19) pandemic. SSRN Electronic Journal https://doi org/10/ggq92n.
Elman, A., and et.al., 2020. Effects of the COVID-19 Outbreak on Elder Mistreatment and
Response in New York City: Initial Lessons. Journal of Applied Gerontology,
p.0733464820924853.
Girona, T., 2020. Confinement Time Required to Avoid a Quick Rebound of COVID-19:
Predictions From a Monte Carlo Stochastic Model. Frontiers in Physics. 8. p.186.
Rahman, A. and Kuddus, M.A., 2020. Modelling the transmission dynamics of COVID-19 in six
high burden countries. medRxiv.
Online
The possible economic consequences of a novel coronavirus (COVID-19) pandemic. 2020.
[ONLINE] Available through :< https://www.pwc.com.au/publications/australia-
matters/economic-consequences-coronavirus-COVID-19-pandemic.pdf>
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