Economic Theory and the 2020 Crisis

Contents

Macro-economics.....................................................................................................................................3

Micro-economics.....................................................................................................................................4

References................................................................................................................................................6
Macro-economics

Covid-19 has affected different aspects of the economy. The major impact of this on the macro-

environmental factor such as employment can be seen in the way a huge number of people have lost

their job due to this pandemic. This lack of employment opportunities and the growth of

unemployment has lead to a severe decline in the income of the people (Baker, 2020). This is because

a lot of the factories, business and industries are shut down in order to maintain social distancing and

keeping safe from the virus. Lack of production automatically led to fewer sales and revenue for the

business which means less income for the enterprise. This in turn meant less production and sales

impacting the GDP of the country as a whole. The different economies of different countries are

related to one another and the lack of production along with the restrictions on exports and imports

have made people suffer because of lack of availability of the basic products as well. This has created

major havoc in the international trade market.

Due to lack of funds with people along with no major production going on in the different industries

of the world, the economic growth has taken a backseat making it critical for government across

borders to work on the monetary and fiscal policies (McKibbin & Fernando, 2020). A great source of

income in different parts of the world is the tourism sector which is a huge source of income and

employment. The fear and chaos spread due to Covid-19 have deteriorated the industry leaving it with

no hope at the present time. This has declined the GDP of the nation creating great economic

recession at different angles.

Though the conditions are quite serious, there are few remedial measures which can be implemented

to protect and preserve the economies from this recession. A great move can be from the government

of the different nations to use cash transfer and tax relief to offer temporarily break and a distance

from this recession. Creation of strong fiscal and monetary policies and provision to fight such

pandemic in the future can be some great measures in this regard (Ozili & Arun, 2020).

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 Figure 1: Supply chain choices in the auto sector

(Source: S&P Global Intelligence, 2020)

Micro-economics

There are many micro-economies which were severally impacted due to Covid-19. One of them was

the supply and demand segment which went crazy in this phase. People started panic buying and the

unavailability of labour and adequate resources along with lack of time made it difficult for businesses

and industries to suffice these needs in time. This made people feel more panicky and many of the

buyers started hoarding of these products which were later sold at a higher price. Shipping of products

from one country to others with regard to the raw materials and the finished goods was delayed

4
resulting in longer transportation period (Anderson et al., 2020). This led the businesses to suffer and

a lot of products got damaged in the process. All this was responsible for quite a loss to the businesses

and the economies of the world.

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References

Anderson, R. M., Heesterbeek, H., Klinkenberg, D., & Hollingsworth, T. D. (2020). How will

country-based mitigation measures influence the course of the COVID-19 epidemic?. The

Lancet, 395(10228), 931-934.

Baker, S. R., Bloom, N., Davis, S. J., & Terry, S. J. (2020). Covid-induced economic uncertainty (No.

w26983). National Bureau of Economic Research.

McKibbin, W. J., & Fernando, R. (2020). The global macroeconomic impacts of COVID-19: Seven

scenarios.

Ozili, P. K., & Arun, T. (2020). Spillover of COVID-19: impact on the Global Economy. Available at

SSRN 3562570.