Overview

Knowing how important currency is in any survey, issues, or principles of economics course, I, author Robert Guell, developed this chapter on COVID-19 to bring this event into context for today’s students. There are very few economics topics that illustrate a vast variety of microeconomic and macroeconomic concepts.

Although this chapter is substantially longer than any issues chapter that I authored for Issues in Economics Today, it touches on background elements of pandemics, micro issues, macro issues, government responses, and international comparisons. It can be weaved into a course or completed after necessary fundamentals are covered. It is also modular in nature and may be used in portions.

Resources

In addition to the eBook bonus chapter, you can find the full accompaniment of assignable digital content in for your students via +Add Assignment on your course homepage in Connect. These assignments include SmartBook 2.0, end-of-chapter problems, a test bank, and an Application-Based Activity, “Intro- Economics of a Pandemic.” For more details, see the Connect Content Matrix and Application Based Activity Teaching Notes.

Other instructor resources include:

• PowerPoint
• PowerPoint (Accessible Version)
• Instructor's Manual
• Solutions Manual

Chapter Highlights

This chapter’s structure:

• helps students simultaneously understand the big picture of the COVID-19 pandemic and analyze the details from a wide variety of economic lenses.
• uses familiar tools for introductory and principles students.
• provides the most compelling real-life examples. From macro topics like monetary and fiscal policy, to micro topics like price gouging and shortages, it provides fresh, relevant applications across the spectrum of principles concepts.
• empowers students to extend the technical and graphical analysis to the time when you teach it by providing easily absorbed theoretical and methodological explanations.

This chapter is unique because:

• aside from obvious economic data points, it includes data on the rapid increase in unemployment claims, the flight to safer currencies and asset classes, and the dramatic decline in airport screenings.
• it contextualizes data beyond media interpretations by exploring the practical impact of exponential growth, the challenges of extrapolation, and the inaccuracies of early case data.
• it explores the role of demographics and culture in explaining why some countries succeeded in stemming the spread and others struggled.
• it highlights the shortages caused by globalized supply chains in the electronics, medical equipment, and pharmaceutical industries.
• it uses the Federal Reserve’s traditional and expanded tools, while also emphasizing the its extension into the municipal bond market directly impacting public universities.
• it features the reallocation of manufacturing resources from obvious uses to emergency deployments with distilleries making hand sanitizer and GM manufacturing ventilators serving as examples.
• it strengthens the usual explanation of price gouging by comparing the behaviors of large retailers to individual online marketplace sellers.

Chapter Summary

COVID-19 precipitated shortages for key goods that were made worse by laws prohibited price gouging. It motivated substitutions in both consumption and production of PPE, which sparked innovation in the medical industry. It shut down entire industries (travel and much of retail). It disrupted industries as varied as crude oil and groceries. Further, it demonstrated the need for public goods such as basic research and the national stockpile of PPE. On the macro side, economists, who dismissed the possibility of another Great Depression, were suddenly predicting rates of unemployment near those experienced in the 1930s. The health-justified shutdown of economic activity triggered the most significant monetary and fiscal policy actions in U.S. history. It caused the fastest decline in global stock prices ever. It shattered economic records: a level of new unemployment filings that were nine times the previous record, negative crude oil prices, deficits in excess of $3 trillion (twice the previous record), a $3 trillion injection of liquidity, and countries experiencing 30 percent declines in GDP. The virus touched almost every person on earth in one way or another. Each of these concepts is explored throughout the chapter.