The US Economic Cycle during the Pandemic
This article analyzes the economic impact of the pandemic, providing insights into the consequences of alternative policies. Covid-19 is the largest shock to hit American economy since the Great Depression. Pandemic affects demand and supply, different sectors, different technologies, and different people. Pandemic has associated with economic crises and may have serious macroeconomic consequences. Thus, at current wages and prices, the demand for labor is likely to decrease. The consumption of certain goods and services during the pandemic, the relative price for goods and services affected by the pandemic will have changed dramatically. Today’s effective demand will be reduced, and even more so if consumption of “pandemic affected goods and services” are complements of goods and services not directly affected, so the reduced consumption of the former leads to reduced demand for the latter. A section of the article reviews the major effects of modern business cycle. Author considers that further production fall will become a serious obstacle to the policy of American leadership. American economy is climbing out from the depths to which it had plummeted during the Great Lockdown in 2020. But with the COVID-19 pandemic continuing to spread, many countries have slowed reopening and some are reinstating partial lockdowns to protect susceptible populations. While recovery in China has been faster than expected, U.S. economy’s long ascent back to pre-pandemic levels of activity remains prone to setbacks. The level of global GDP in 2021 is expected to be a modest 0.6 percent above that of 2019. The growth projections imply wide negative output gaps and elevated unemployment rates this year.