Question

In March government-approved stimulus checks for every citizen. While thinking about aggregate expenditure and the economy I want you to discuss the following 1. why was stimulus checks sent to every taxpayer in the U.S? 2. What do you think are the economic impacts of the checks? 3. Do you think there is a need for another round of stimulus checks?

Answer 1

1.

Stimulus checks were sent to every tax payers, because these people were going to suffer either from unemployment, or salary cuts, or leave without pay or any other form of loss of income in the wake of COVID-19 pandemic. These checks help them spend some money on their essential expenditures that could boost the aggregate demand in the economy and economy remains in good health ( if not better). Besides, stimulus checks will have multiplied effect and it will contribute to the increase in GDP to offset the shrink that could take place due to COVID-19 pandemic.

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2.

Economic impact of the check is to help people spend and contribute to the increase in aggregate demand. It will make firms produce and in this process create new jobs. So, more people get employed and their purchasing power increases. It further increases AD. So, a cycle of positive events takes place and economy recovers from slow down due to COVID-19 pandemic. Besides, when consumers spend money via checks, then become more optimistic about the economy. It also helps economy to recover.

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3.

It depends upon the duration of the COVID-19 pandemic in the USA. Since it is a temporary problem and recently, the unemployment rate has decreased, then there is no immediate need to go for another round of stimulus checks. The focus can be on ensuring food to the marginalized section of the society to not let them suffer from hunger.

In coming months, on the basis of COVID-19 pandemic showing impacts or getting slow in the USA, will decide, the amount of next stimulus check if there is any.