Question

(B) Discuss the economic policies conducted by policymakers in the United States in response to the spread of COVID-19. Discuss how effective these policies are in dealing with the economic consequences of this event. Use concepts and tools from macroeconomics to support your answer.

Answer 1

SOLUTION :

The United States in response to the spread of COVID-19. Take many Fiscal and Monetory policies are in dealing with the economic consequences of this event.the United States has implemented a range of measures including travel restrictions, social distancing, declaration of states of emergency, closure of schools, bars and restaurants, and increased testing.

Key policies are :

FISCAL POLICY

In term of fiscal policy US take some action like $8.3 billion Coronavirus Preparedness and Response Supplemental Appropriations Act and US$104 billion Families First Coronavirus Response Act which together provide 0.5 percent GDP for health care, sick leave, small business loans, and international assistance .The Coronavirus Aid, Relief, and Economic Security Act provides for transfers to households, extended unemployment insurance, food assistance, incentives for firms to maintain employees on payroll, loans and grants for businesses, funding for hospitals and health care infrastructure, transfers to state and local governments, and deferral of payroll tax obligations. Federal student loan obligations have been suspended for 60 days and tax filing deadlines have been delayed.

MONETORY POLICY

US apex finacial body Federal funds rate lowered by 150bp to 0-0.25bp. introduced facilities to support the flow of credit are : (i) Commercial Paper Funding Facility to facilitate the issuance of commercial paper by companies and municipal issuers; (ii) Primary Dealer Credit Facility to provide financing to primary dealers collateralized by a wide range of investment grade securities; (iii) Money Market Mutual Fund Liquidity Facility to provide loans to depository institutions to purchase assets from prime money market funds (covering highly rated asset backed commercial paper and municipal debt); (iv) Primary Market Corporate Credit Facility to purchase new bonds and loans from companies; (v) Secondary Market Corporate Credit Facility to provide liquidity for already-issued corporate bonds; (vi) Term Asset-Backed Securities Loan Facility (TALF) to support the issuance of asset-backed securities backed by student, auto, credit card, and small business loans.

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