Question

In the terminology of economics, what is the best explanation for the universal economic hardships of 2020 during the pandemic?

Wage increases forced companies to lay off workers.

Technology fell.

Political disputes between the two main parties caused strife and general economic declines.

Trade barriers hurt GDP and income.

Interest rate increases stifled investment.

Answer 1

The correct option to the question is that the interest rates increases which has stifled the investment. In the financial crisis or such pandemic situation the interest rates fall down because of which the investors remain less interested in investing their money in anything. An increased supply of credit or money shall result in decreasing interest rates. In pandemic situations, the people demand to borrow more money or credits from banks, and due to this when the supply of credit availability increases then the interest rate decreases.