Choose one current event. Describe the event and discuss the economic implications of this event. What economic effects might this have at the individual and societal levels?
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Answer:
In scenario four, we assume that COVID-19 eventually affects all countries, but this pandemic is a one-time event and its severity is low. For China, we assume a 10% attack rate (10% of all people fall ill) and a 2% case fatality rate (2% of those who are ill subsequently die). We then use an Index of Vulnerability for each country, basically calibrating how much it is like or different from China, to estimate the effects of the virus in other countries. These assumptions are fed into the model to determine the severity of the outbreak in each country.
There are many effects to Economy such asThe loss of real GDP, relative to what would have been the model prediction in 2020 without the virus, is approximately $US2.3 trillion for the world, which is 2% lower than the baseline. Of that, the US economy loses $US420 billion in 2020, or about 2% less than the pre-virus baseline. Of course, if the virus spreads more widely or turns out to be more severe, the costs would be larger.
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