Due to COVID-19 a recession is inevitable at US and global level. Discuss the current Fiscal...

Due to COVID-19 a recession is inevitable at US and global level. Discuss the current Fiscal Policy in place to combat the impact of the virus on the US economy. Also, explain how the recent Fiscal Policy is expected to fix the changes in GDP, Inflation and unemployment. Discuss the current Monetary Policy in place to combat the impact of the virus on the US economy. Also, explain how the recent Monetary Policy is expected to fix the changes in GDP, Inflation and unemployment.

Expert Solution

The US has been great in fiscal stimulus of 484 billion dollars and US Fed unlimited bonds buying programmes worth 2 trillion dollars with rate cuts, CRR and SLR and liquidity coverage ratio cuts. Triggering automotic stabilizers and combined above policy will help alleviates financial distress and grow economic growth throufh higher consumption and disposable incomes.

However the cases has risen to 1 million approximately and states have been relaxed and thus caused havoc.

To avert this crisis, US must impose lockdown and gradually ooen economy using partial lockdown only after 2 months of complete lockdown. Major boost towards creating vaccination and healthcare for curing patients is required.

Negative impacts for not imposing lockdown :

Coronavirus has had huge impact on economic growth due to lockdown and shutdowns and social welfare losses.

The economic growth remains subdued as Aggregate demand and consumption both fall simultaneously.

Investment is pumped out due to falling interest rate regime and lower economic outlook of companies.

Government spending is ramped up due to an expansionary fiscal policy by reducing taxes and spending. Also net exports go negative as imports surge due to supply shocks.

Negative growth in GDP causes high unemployment ajd lower inflation based on Philips curve movement.

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Rahul Sunny answered 8 months ago

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