The COVID-19 outbreak has struck Canada as well as every other part of the world since it was first reported in December 2019 and the disease continues to cause so much havoc.
COVID-19 outbreak has struck Canada as well as every other part
The COVID-19 outbreak has struck Canada as well as every other part of the world since it was first reported in December 2019 and the disease continues to cause so much havoc. Although this is a public health issue, it has managed to hit the global economy negatively in different ways. The stock market continues to plummet every day, with people losing billions of their wealth; most businesses have come to a halt and workers have been asked to stay home in order to reduce the spread of the deadly virus; the virus is also causing people to fall sick and not being able to work.
This pandemic has also caused some small-scale businesses to lay-off workers partly because they are not able to pay those wages and salaries. The airline industry has come to a standstill because various countries have closed their borders and are limiting traveling. Due to this, airline companies like West Jet are expecting to lay-off between 20%-50% of their workers if the situation persists in the coming days. Most sporting events and leagues around the world have been suspended. Companies like Nike and Apple have closed all stores due to this pandemic. Also, Crude oil prices keep plunging over these few months.
Throughout the semester, we have discussed various economic variables and how they are related. We have also discussed the difference between the Classical and the Keynesian Economists’ view about how the economy reacts to shocks in the market. We have also discussed how the government and the central bank can use Fiscal Policies and Monetary Policies respectively to help solve a recession in an economy.
With reference to everything we discussed in class throughout the semester, discuss how the COVID19 pandemic has affected or is affecting the Canadian economy and how the government of Canada together with the Bank of Canada are trying to mitigate the problem.
Your essay should include, but not limited to the information in this guideline
1. Make sure to discuss how this pandemic will affect Canada’s GDP and growth rate (makes will be awarded for explanation and examples.) (5 marks)
2. Make sure to discuss how the pandemic will affect Canada’s interest rates. (3 marks)
3. Make sure to discuss how the pandemic will have an effect on Canada’s inflation and also discuss what the Bank of Canada should do/are doing to maintain their core values with respect to inflation. (5 marks)
4. Also, make sure to explain how the pandemic will have an effect on unemployment. (3 marks)
5. Based on our discussions in class, how do you think this pandemic will also have an effect on the nominal exchange rates? (2 mark)
6. Explain the results that can be predicted from Classical Economists’ view with respect to this economic shock assuming the shock affects only aggregate demand (make sure to explain what will happen to both real and nominal variable) (6 marks)
7. Explain the results that can be predicted from Kaynesian Economists’ view with respect to this economic shock. Assuming the shock affects both the AD and SRAS but not the LRAS, explain the short run equilibrium, and how the economy will transition back to its long run equilibrium using the Supply-Side Adjustment Mechanism. (6 marks)
8. Considering your answer to question 7, what are the Government of Canada and Bank of
Canada doing to mitigate this situation. Use the AD-AS model to explain how they can solve or reduce the economic effects of this pandemic. (10 marks)
9. Clarity and overall structure of the essay. (10 marks)