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Covid-19 Pandemic-Related Macroeconomic Issues


COVID-19 sparked many changes that affected various aspects of life, including the economy. Categorically, the economic indicators can fall into two primary areas, namely macroeconomic and microeconomic. The macroeconomic segment covers factors that affect the entire republic or many players. The typical examples are the interest rate, the unemployment rate, inflation, and net exports (Muhović and Subić, 2019). Conversely, the microeconomic section addresses elements that affect the economic players at a personal level. The perfect examples are individual savings, one’s income, and consumer equilibrium. Specifically, the essay explains the coronavirus-related macroeconomic challenges that plagued the US economy.

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The Macroeconomic Challenges

Price Changes

The price change is the first reliable macroeconomic indicator to evaluate COVID-19’s effect on the American economy. Specifically, economists use two terms (inflation and deflation) to explain the changes in product rates. According to Yellen (2017), inflation is the shooting of product and service prices in the economy. Conversely, deflation is the opposite, meaning a drastic decline in prices in an economy over a specific span (Tokic, 2018). The COVID-19 pandemic sparked deflation and inflation, but the impact varied from one sector to another. The paragraphs below highlight how each of these macroeconomic issues affected the citizens.

Coronavirus sparked many inefficiencies in the production sector that sparked demand-pull inflation. Notably, demand-pull inflation occurs when the need for some items and services supersedes the market supply (Adayleh, 2018). One way the market supply can fall short is when the production decreases drastically. Unfortunately, this trend prevailed in 2020 when the governments issued “stay-at-home” orders and anti-socialization restrictions. For example, low-income American households recorded a 1.12% rise in the consumer price index in 2020 because the pandemic slowed general production (BLS, 2021). Also, demand-pull inflation affected the healthcare sector as many people were buying pharmaceutical products for protection and treatment. For example, personal protection equipment prices rose substantially in 2020 (Park et al., 2020). Critically, excessive inflation is unfavorable because it raises living costs and undermines savings. For example, if the rent doubles, the tenants will spend twice what they spent earlier, thus slowing their savings. In short, inflation is the first macroeconomic issue that emerged from COVID-19.

The pandemic also triggered deflation in many economic sectors in America. Hypothetically, deflation occurs mainly when the demand exceeds the supply, thus lowering the equilibrium prices (Tokic, 2018). This trend prevailed in 2020 when coronavirus peaked, sparking the government to suspend most economic activities. For example, the US government stopped flights and unnecessary travel, thus reducing the demand for petroleum products. Hence, the prices of crude old declined substantially in 2020 because of low demand. For example, the average per-barrel price dropped to a record-breaking level (below $0) by April 2020 (Kearney, 2020). Analytically, deflation is an unfavorable economic pattern because it discourages production and economic growth. For example, the US suspended oil production temporarily in 2020 because it was uneconomical (costs exceeded prices) (Kearney, 2020). In general, deflation is the second macroeconomic challenge that arose from the pandemic.

GDP Growth Rate

GDP growth rate is another relevant macroeconomic indicator to expose COVID-19’s effects. First, gross domestic price (GDP) comprises all products and services that an economy produces over a financial period (Suyono et al., 2017). Hence, the GDP growth rate assesses the percentage by which the economic production changed over successive periods. In other words, this indicator measures the peaks and declines in economic operations. However, the coronavirus sparked many setbacks that jeopardized the US goods and service sectors. The following paragraph describes how the pandemic hurt the US and global GDPs.

COVID-19 affected local and global GDP by forcing workers to stay home, delaying production. For example, many American automotive firms depend on imported car parts from China (Wayland, 2020). However, the Asian republic ordered corporates to reduce the number of workers per shift to prevent cross-infections. Since the Chinese industrial sector relies primarily on labor, reducing the number of employees narrowed the car part production. Hence, US automotive firms like Fiat Chrysler scaled down their vehicle manufacturing due to car part shortages (Wayland, 2020). This trend also affected European automotive brands that rely on Chinese parts like Jaguar-Land Rover. Cumulatively, the slowed production reduction significantly contributed to reducing the US GDP growth rate. For instance, the US real GDP grew by 2.2% in 2019, but the figure dropped by 3.5% in 2020 (BEA, 2021). Hypothetically, a decline in productivity is detrimental to the economy because it reduces job opportunities and taxes. For example, Chrysler could not hire more workers when it had slowed operations because of car part shortages. Generally, the slow GDP growth rate that followed COVID-19 was problematic to the government and citizens.

Unemployment Rate

The unemployment rate also unveils coronavirus’ macroeconomic repercussions to the involved parties. First, this term represents a workforce segment, which is ready to work under the current job market circumstance but cannot find an opportunity (Alauddin and Khan, 2021). Analytically, high unemployment is problematic to the economy. For example, the government’s income taxes reduce due to a few working citizens. The dependency rate also heightens because the number of people depending on the few employed relatives rises and the government (Anghel et al., 2017). Furthermore, criminal offenses like robbery and drug trafficking usually escalate because jobless people switch to activities like crime and production. Lastly, a high unemployment rate reduces people’s purchasing power, thus causing deflation and slowing the GDP growth rate (Anghel et al., 2017). The program below demonstrates how the pandemic impacted joblessness levels in the US.

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Coronavirus increased America’s unemployment rate substantially in 2020 in the following ways. First, the pandemic prompted the government to close social places to cut cross infections. As a result, most restaurants, clubs, and beaches shut down and retrenched workers, thus increasing joblessness. For example, Disney theme parks laid off over 100,000 workers when it shut operations in April 2020 because of COVID-19 (USA Today, 2020). Additionally, high deflation rates discouraged many producers, sparking them to slow production and release some workers. Statistically, US coronavirus-related joblessness hit 8.2% by April, with over 12 million people claiming unemployment benefits (USA Today, 2020). Generally, this trend was detrimental because it attracted many hypothetical disadvantages of a high unemployment rate like over-dependence on the government for support and reduced tax generation.

International Trade

International trade dynamics that emerged following COVID-19’s peaks also pose macroeconomic challenges. First, international trade represents transactions between two or more republics (Ikechi and Nwadiubu, 2020). As a result, export and import are fundamental components in evaluating changes in cross-border transactions. Hypothetically, governments realize deficits when they import more than they export, which also translates to unfavorable terms of trade. This trend attracts adverse repercussions like weakening the domestic currency and lowering the country’s self-reliance. The following paragraph unveils how covid-19 impacted US imports and exports.

Coronavirus impacted America’s exports and imports in a different manner (positively and adversely). Critically, the US pharmaceutical sector benefited from exporting Covid-19 vaccines, such as Pfizer, Modena, and Johnson & Johnson, to other republics (Sabrina-Siddiqui and Restuccia, 2021). Nonetheless, the exports decreased compared to the previous year because the pandemic undermined the international demand for local products and services. For instance, stopping international flights prevented foreign tourists from visiting the US, thus undermining the hospitality sector. Overall, America’s imports over 2019-2020 declined by 15.7% due to the pandemic (BEA, 2021a). This pattern was problematic because it undermined America’s self-reliance, tax generation, and job creation.

Government Expenditure

Moreover, government expenditures reveal how COVID-19 undermined the US economy. This phrase represents the total funds the government spent in its annual budgets (Omodero, 2019). Analytically, a drastic rise in government expenditure could spark challenges like high public debts. In other words, authorities rely on printing money, taxes and fees, and borrowing to finance their budgets. As a result, a rising expenditure will increase at least one of the three sources. The paragraph below outlines how coronavirus impacted US government spending.

America’s government spending rose substantially because of the following COVID-19’s economic implications. First, the pandemic cost many jobs and rendered millions of citizens unemployed (USA Today, 2020). As a result, the federal government scaled up the expenditure on social welfare programs like unemployment benefits. Additionally, the federal government used enormous resources to boost the stumbling industries like the banking sector to sustain the economy. As a result, federal spending over 2019-2020 rose by 45% primarily because of the pandemic (USA Facts, 2021). Analytically, this trend sparked other economic challenges like increased public debt. Since many people were jobless and corporates had cut production, the taxes decreased. As a result, the government relied primarily on borrowing to meet the increased needs and budget. Statistically, the deferral debt rose by around $3.1 trillion in 2020, mainly because of coronaviruses (USA Facts, 2021). In general, a hike in government expenditure is detrimental because it increases public debt and the burden to repay creditors.

Tax Revenues

Lastly, COVID-19 sparked macroeconomic concerns when it cut tax revenues. According to Basheer et al. (2019), taxes are the leading income source for any government. However, these revenues rely primarily on the unemployment rate (income tax) and production (corporate taxes). The challenge is that coronavirus claimed many jobs and prompted numerous businesses to shut down. Subsequently, the government taxes declined substantially, thus causing an unfavorable balance of payment. For example, federal taxes fell from $3.536 to $3.445 trillion from 2019-2020, resulting in a 3.57% decrease (USA Facts, 2021). Critically, the tax decline was problematic because it compelled the government to borrow and increase the public debt and burden.


In summary, COVID-19 fueled many macroeconomic issues; the first is high inflation which increased the living costs and pressure on low-income earners. The pandemic also sparked deflation in some markets like the petroleum sector, thus lowering incomes and job creation. Next, the pandemic undermined the GDP growth rate, thus jeopardizing job creation for the citizens and federal tax generation. Unemployment increase was another challenge that emerged during COVID-19’s peak and slowed productivity, aggregate demand, and tax generation. The pandemic also harmed international trade by reducing exports, which slowed America’s income. Besides, the coronavirus increased the government expenditure on social welfare and business support programs, thus raising the public debt and burden. Lastly, federal taxes substantially declined after corporates closed and fired workers, thus hiking the public debt and repayment burden.

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