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The coronavirus pandemic will cause a global recession in 2020 that could be worse than the one triggered by the global financial crisis of 2008-2009,

The coronavirus pandemic will cause a global recession in 2020 that could be worse than the one triggered by the global financial crisis of 2008-2009, but world economic output should recover in 2021, the International Monetary Fund said on Monday.Use the IS-LM-BP model to explain what this shock will mean for the levels of output/income and interest rates in South Africa.Draw the graph and explain the complete chain reaction using the attached recipe for analysing external disturbance of covid 19.

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'Recipe' to analyse internal / external disturbances (p. 170) a Step 1: Primary effect a Exactly as in chapter 3 o NOW ADD the effect of these changes in r and Y on the BoP (Bop = CA + FA) a Step 2: Secondary Internal effect 1 a Exactly as in chapter 3 o NOW ADD the effect of these changes in r and Y on the Bop 0 Step 3: Summarise steps 1 and 2 a Net effect on Y, r, current account (CA), financial account (FA) and Bop D Remember that the primary effect is always bigger than the secondary effect. a Step 4: Secondary effect 2 (Initial BoP adjustment process via Money supplyl a #4 Bop M'/P decreases => ... effect onr and Y OR 0 # BoP > 0 => M'/P Increases => ... effect on r and Y 0 Changes in r and Y will affect the FA and CA and therefore the Bop a Step 5: Secondary effect 3 (Concluding BoP adjustment via exchange rate) o If Bop ... => rand depreciates => X Increase M decrease, (X - M] Increase => CA Improves => BoP deficit decreases (Improves] 0 If Bop > 0 =>... =>rand appreciates => X decrease M increase, (X - M) decrease => CA worse => [BOP surplus decreases] a Process continues until Bop = 0

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