Negative Effect of COVID-19 on the Gross Domestic Product

The rise of pandemics often strikes countries at a point in which they are not readily prepared. Pandemics always directly impact a country’s economy as it causes all activities to be on hold, including jobs and businesses. The reduction in the productivity of a county negatively affects the country’s GDP as the rate of economic output is lowered. In the case of a pandemic, the affected country seizes to utilize its resources; hence its productivity potential is not fully utilized. The rise of the COVID-19 pandemic has posed several impacts on the United States. The impact has had a long-term and a short-term effect on the economy. The effects include an increased unemployment rate, a reduction in the finances, a drastic decrease in the supply chain, poor tax simulation by the government, and inflation. This paper aims to assess and analyze the effects posed by the COVID-19 pandemic on America’s GDP.

COVID-19 has led to the reduction in the supply chain in both global and domestic setup. This is evident by the research conducted by Oxford Economics which indicates a drop of up to 13% for automotive supply, 8% drop for both the textile and electronic products, and 5% for headline manufacturing (McKenzie 4). Additionally, the statistical data variation in the job supply in the COVID-19 pandemic Periods’ work output to that of the previous year before the pandemic indicates a reduction in the workforce productivity. This has led to a subsequent fall in the GDP hence the reduction in the countries supply chain because the country cannot produce enough to serve the county and supply to others. Furthermore, the lockdown has affected the movement of raw materials, hence disrupting the manufacturing of goods, hence affecting America’s supply chain. Reduction in a country’s supply chain affects the county’s economy by lowering its GDP (Bonadio et al. n.p). The reduction in the rate of domestic labor supply in America has consequently led to the fall of the country’s domestic intermediate input, therefore causing a significant reduction in the country’s GDP.

The pandemic has caused the country’s employment rate as many companies have shut down due to the containment rule enforced by the government. According to the research conducted by the congressional research service, the unemployment rate in America had risen to up to 14.8%, which was the highest ever recorded. At the same time, those companies left to function have opted to reduce the number of employees to fit the government’s social distancing rule. This has led to the reduction of the country’s productivity, hence the no input for the country’s revenue, which has resulted in a high decline in the country’s GDP (Prinz 34). The high and steady drop in employment has led to the wastage of economic resources, negatively impacting the country’s economy. Furthermore, the high unemployment rate has also led to increased poverty, hence causing the country’s GDP to fall as the country becomes less productive. Furthermore, unemployment often lowers consumer demand for specific goods because, through the NPI, which denies access to specific places, most people cannot perform their product sales, reducing income.

COVID-19 has led to a drastic drop in the rate of domestic workforce productivity. The Bureau of Labour Statistics in the US department of labor states that the nonfarm business labor productivity has decreased by 5%, which is the highest decrease in quarterly productivity (BSL 1). A comparison between the work one does at home to that of physical activity, as statistics indicate, is that dependability is quite a law for those who work at home (Petrosky-Nadeau 3). For that reason, they prove to be less productive than those who physically attend work. Such variation has led to the reduction of the productivity of the companies hence causing the reduction in a countries GDP. Moreover, the restriction of movement has affected the economic growth as the country has to support some affected by the pandemic without any constant source of income. Therefore, through the continued application of NPI, the American economy has continued to decrease as no serious economic such business and the companies are being carried out.

The American government tax and stimulus policy that was implemented to enable the country to stabilize its economy has caused some impacts on the country’s GDP. For example, the fiscal policy aimed to restore the economy as the director charged is mason proposed. The fiscal impacts have enabled the county to raise more funds to direct to other more productive economic sectors (OECD n.p). This policy, however, has led to increased poverty in the country as most people who were initially unemployed lack the ability to purchase goods; hence the supply chain of products is affected. The raising of tax has also lowered the productivity of the companies as some of them cannot purchase the raw materials for their production. Therefore, the companies will not employ enough workforce, which slows down the county’s productivity (Maxim 6514). The reduction of both employment rates and workforce due to high tax has led to the constriction of the GDP. Stimulating tax also negatively impacted the supply chain process as most people might not afford expensive goods.

Inflation in America increased due to implementing the economy’s recovery policy. Through a conference meeting, the president of the Stuart Estate Planning Wealth advisor, Craig Kirsner, states that the country is experiencing a surge in inflation because of the high demand of products with less supply; hence, the price has been raised (Carosa n.p). This is because the policy has led to a substantial rise in the prices of goods and services, hindering most American citizens’ ability to afford them (Ha, Kose and Ohnsorge 50). The decline in the citizen’s purchasing power has negatively impacted the country’s GDP by hindering the supply chain of domestic goods and services. Inflation lowers the value of pension in the country, saving value, and treasury note, which is often the main source of income to the country. In this case, the value of GDP shrinks as the country’s economy is not achieving a positive appreciation.

Furthermore, inflation often affects the market’s supply chain as no formal flow of goods is witnessed, leading to a high unemployment rate. Some companies might suspend a section of their employees to save on expenses to improve productivity (Astuti n.p). The new recovery policy cannot provide a better solution for the low country’s AGDP because it impairs the flow of activities such as production, sales, and supply of goods.

In conclusion, the pandemic has had several negative consequences for the economy’s many components, including the provision of stock marketing services and the employment of normal individuals in their daily occupations. Following the taming of the third coronavirus wave, a reduction in the constraints put on global residents has given relief to economies all around the globe, including the United States. Because of the government’s restrictions on the spread of the epidemic, the consequences have resulted in a rise of unemployed people. When it comes to economic harm, the COVID-19 pandemic is mostly responsible for decreased demand, which means fewer customers are eager to spend their money on the products and services offered in the global economy. On the other hand, inflation occurred during the pandemic due to the government’s recovery strategy, which increased taxation. Furthermore, the pandemic’s impact on the economy was primarily due to the disruption it caused in the supply chain during the lockdown period.

Works Cited

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Ha, Jongrim, M. Ayhan Kose and & Franziska Ohnsorge. “Inflation During the Pandemic: What Happened? What is Next?” (2021): 50.

Maxim, M. R., & Zander, K. K. “Green Tax Reform in Australia in the Presence of Improved Environment-Induced Productivity Gain: Does It Offer Sustainable Recovery from a Post-COVID-19 Recession?” Sustainability 12.16 (2020): 6514.

McKenzie, Baker. Beyond COVID-19 supply chainresilience hold key to recovey. 2020. Web.

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Petrosky-Nadeau, N., & Valletta, R. G. “An unemployment crisis after the onset of COVID-19.” FRBSF Economic Letter (2020): 1-5.

Prinz, Edward Kong: Daniel. “The impact of shutdown poolicies on employment during a pandemic.” covid economics 17.13 (2020): 28-76.

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