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The economic implications of coronavirus

  • Explain the immediate impact of Coronavirus on economy
  • Explain what demand and supply shock mean
  • Identify measures government is looking to take to help economy
CPD
Approx.30min

"Helicopter money was used by the Hong Kong government earlier in the virus outbreak and is now being suggested by the White House. These measures are designed to directly stimulate consumer demand or support corporate balance sheets by non-refundable government cash handouts.

Markets are fixated on how long and how deep the economic contraction will be as a result of Coronavirus.

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Much of the support provided by governments and central banks so far has an implementation lag until it enters the real economy.

Interest rates are a classic example of this and take between 18 to 24 months to fully take hold.

The highly accommodative monetary policy support that we have seen in the last two weeks will supercharge the recovery when it comes but will do little to mitigate corporate stress in the next few months.

As a result, markets may not find a real floor until fiscal stimulus directly tackles the economic impact of the next few months.

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. What do the eurozone debt crisis and Coronavirus crisis have in common?

  2. True or false, a supply side shock occurs when it becomes more difficult for goods to get to market, either because banks have stopped lending, so companies are unable to finance their operations, while consumers are less able to access credit even if they have a suitable income.

  3. True or false, while a supply shock to the economy can have profound long-term impacts, the short term problems are relatively easy to solve when accompanied by a demand shock.

  4. Why does Peter Toogood say that as a result of the Coronavirus crisis “GDP has effectively stopped”?

  5. According to Edward Park, even if the present set of emergency measures work and the UK economy bounces out of recession and the Coronavirus pandemic is controlled, why is it unlikely that the economy will experience a sudden and swift uptick in growth rates?

  6. Why is helicopter money both a supply and demand side measure?

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You should now know…

  • Explain the immediate impact of Coronavirus on economy
  • Explain what demand and supply shock mean
  • Identify measures government is looking to take to help economy

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