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Covid-19 on economic variables Mathematics & Economics Essay

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ECO 360 2020 Spring Final Exam Deadline: Saturday May 16, 11:59 EST Instruction: • There are 3 questions. • Read the requirement of each question carefully. You will lose credit if you failed to follow the requirements. • Write your answers in one file in a well-organized way. The format should be 12-point Times New Roman font, single-line spacing, normal margins and justified text alignment. • Please submit a Word or PDF file on Blackboard before the deadline. DO NOT write your answers on paper and submit a picture/photo. That will NOT be accepted! Late submission will NOT be accepted either! • Do not commit plagiarism! 1. The pandemic outbreak hit the US economy since March. Find how the major economic variables changed in the first quarter. These variables may include unemployment rate, real GDP per capita, inflation, real interest rate, money velocity, stock price index, and other variables that you think can reflect financial markets and macroeconomic conditions. Hint: You can use the FRED economic data from Fed St. Louis. Notice that these data series may have different frequencies. If it’s quarterly or monthly data, show the change in a table. If it’s weekly or daily, show with a graph. If there are many, you should always use the one with higher frequency. In addition, you should also describe with brief words about what are the changes to these variables. 2. Summarize the policy responses of the Fed since March 3rd until the end of April. What are the policy changes in conventional monetary policy (e.g. federal funds rate, discount rate, interest rates on reserves, etc.), and in unconventional monetary policy (e.g. liquidity facilities, paycheck protection programs, etc.)? Hint: You can find the information on the Federal Reserves’ website in the press release. To make it more readable, organize your answer with bullets points and concise words. You should also mention the date when the policy was announced. Copy and paste will result in zero credit for this question!!! 3. For this part, you should use the theories and models we studied in this course to analyze the current crisis. a. What do you think are the reasons of the change in money velocity based on your answer in question 1? Specify the theory you use that supports your argument. b. What is the type of the pandemic shock? Use the AD-AS framework to show what is the impact on short-run and longrun equilibria. Is it consistent with what you find from data in question 1? c. What are the aims of the Fed’s monetary policy responses as you summarized in question 2? How do these responses help smooth the fluctuations in the short run? d. Given the current level of the federal funds rate, what type of monetary policy (conventional or unconventional) do you expect the Fed to use if the recession gets deeper in the future? Why? Hint: You should explain using the AD-AS model and demonstrate with graphs and brief words for part b to d.

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ECO 360 Final Exam
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ECO 360 Final Exam
Covid-19 on economic variables
The Covid-19 pandemic has had a serious impact on the U.S economy (Menickella, 2020). Despite the country having a controlled flow of essential services, states and their respective governments have no option but to put to action health measures. These measures include social distancing and isolation to curb the disease but, as a result bringing a significant blow to the economy. This situation has brought about global adverse effects in the economy, leading to a condition of recession with adverse effects such as job losses, inflation, shut down of companies and other small businesses, drop-in production rates from the industries.
Unemployment has taken center stage with the development of the pandemic to a severe level. In the United States, the introduction of quarantine measures has brought a standstill to most economic activities. This has reduced consumption to an estimated percentage of 25%. A reduction in consumption increases the level of unemployment, which is expected to be at 12.8% for the second quarter of the year. Sectors most affected include the travel industry with travel restrictions implemented worldwide. Statistics show that nearly 8% of employed workers in one month have lost their job as a result of the pandemic in the U.S. While those still in work, an expected probability of more than 30% risk job loss in the next four months. Overall growth in the number of employees on company payrolls dropped to 0.8 percent in March, down from 1.1 percent in February, according to a recent preliminary tax survey.
In the U.S, the so-called pandemic has, at the large, lead to inflation rates. In the month last the inflation of consumer prices decline to 1.7 percent. General merchandise price inflation, an earlier, less precise metric still being used for inflation-linked government bonds and other commercial operations, dropped from 2.7 percent in January to 2.5 percent. Inflation of producer output prices is a measure that can provide a guide to incoming inflation pressures slowed from 1.0 per cent in January to 0.4 per cent than most anticipated in February. The current situation is expected to bring a rise in inflation. With severe prevention mechanisms such as the social distancing with a response to the pandemic, inflations cause increases to a higher level. Reports indicate that the inflation rates are expected to rise for the coming month from 3.3 to 3.5 percent in the following month. There is a higher chance that it will turn contrary if the pandemic continues to exist for a more extended period. The standstill brings this in economic activities. The situation might bring a global financial crisis that will structurally weaken the economy. There is no good monetary policy that can offer flexibility for members of the different economic zones. The inflation rates are also brought by increased demand for cash to combat the pandemic; thus, there is a decline in the corresponding velocity for money. The high inflation rates are caused by the inability of service providers and manufacturers to supply the products and services to the consumer’s pandemic. It has also brought about a r...
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