Question

Questions ( 1 ) To use Aggregate Supplier & Aggregate Demand framework in order to explain how an expansionary monetary policy and expansionary fiscal policy can increase the national income (fight recession)?

Subject ::COVID-19 counter: UAE businesses are out to save their cash

By allowing businesses to save on costs, the UAE government has managed to ease short-term concerns. But businesses will need all they cash they can save or loan to get through the difficult months.

Dubai: Preserve cash at all costs – that’s the only priority for UAE businesses as they wait for commercial activity to resume. Even sending their staff on paid annual leaves is a way of cost saving for them.

“More businesses are “forcing” their staff to use up all their accumulated leave rather than allow any encashment,” said an HR consultant advising two of the leading corporate houses in Dubai. “So far, few businesses have taken the real hard decisions of massive layoffs or asking them to go in for extended pay cuts.

“But that will come... soon.”

On Monday, the corporate sector was shaken up by a memo reportedly signed by Emaar’s Mohammed Alabbar that talked about voluntary pay cuts for everyone from the chairman – Alabbar – right down to the support staff. The cuts were 100 per cent for Alabbar and up to 30 per cent for Grade 3 staffers. The cuts came into effect from April 1.

Emaar has so far not officially confirmed whether the circulated memo states the actual case, and if yes, how long the cuts will be in effect. “It’s likely that the cuts will only be for a set period of two to three months,” said a consultant.

Answer 1

When the Dubai is in short of the Cash during the time of COVID 19

When Dubai is in short of the Cash during the time of COVID 19 it would experience the economy above graph

As observed, in the above graph, there was a lower price level due to the recession, the Dubai Economy, the output would reduce to the Ye and the price would reduce to the Pye level. It would lead to lower demand by the consumer and the spending. There is a recession, it can lead to the lower pay, causing more job cuts, producer producing less and the economy further falling in a recession.

Monetary policy in Dubai would be adopted by the Central bank of Dubai, which would aim to have the complete discretionary. The goal would be a recession, aimed at the Central Bank of Dubai would aim for the lower interest rates along with the increase in the money supply. This would be the overheated expansion, and the bank would aim to raise the interest rates and decrease the money supply.

Fiscal policy would be the tax cuts, stimulus spending, aims for the effective use of government spending along with aiming for the tax policies that can influence economic conditions. In the recession, the main aim would be the channelize the government that can integrate the expansionary fiscal policy that can aim for the lowering tax rates that can aim for the aggregate demand and fuel economic growth.

The usual goals of both fiscal and monetary policy are to aim and have Dubai to attain full employment, which can have a high rate of economic growth, and aimed for the stabilize prices and wages.

In an AD/AS diagram, it is important to have the long-run economic growth that can link to the high productivity increases and it can generate the time to make it a higher rightward shift of aggregate supply. This would subsequently lead to a rightward shift in the AD-AS to increase the output and the price.