Question

The Virus has been blamed for causing much economic havoc in the world and in the United States. In reality, much of the damage has been cause be governments using their police power to prohibit beneficial economic activities from occurring. Assume the Virus scare is over. You are Chairperson of the Federal Reserve System. What monetary policies would you implement to get the US economy improving and growing, if any. You must explain correctly and in detail what they are and how they would work. This means going into detail about their transmission mechanisms. You may choose more than one. You have to convenience your skeptical professor that you know what you are talking about.

Answer 1

If we assuming that the COVID-19 virus scare is over. We know that at this moment the US economy get slow down due to this pandemic. We suggest that if we have to expand US growth again then we should follow given below ways.

Improving the infrastructure: To improve US economy Underinvestment in infrastructure has held back private sector productivity, long-term growth, and job creation. There is a case for a sizable increase in public spending on maintenance, repairs, and new infrastructure projects, within the constraint of deficit and debt reduction.

Revitalizing trade: Again we have to revitalizing trade because of it goes slow down due to COVID 19, we have to promoting a level playing field in trade is favorable for the United States and elsewhere. There is scope to modernize trade agreements, including the North American Free Trade Agreement, in a way that is mutually beneficial for all participants. The United States would gain by keeping its markets open as it pursues new or amended trade agreements.

Strengthening healthcare coverage: To improve the economy of US we should strengthening the health care converge. The aim of healthcare policies to protecting the gains in coverage achieved since the financial crisis, particularly for those at the lower end of the income distribution. Doing so will have positive implications for productivity, well-being, and labor force participation. At the same time, the system will need to contain healthcare costs.

Reforming the tax system: Now we have to simplify the tax sytem-with lower tax rates and fewer exemptions—and redesign it to create incentives for people to enter the labor force, decrease income polarization, and support low- and middle-income households. An increase in revenue can be sought from a broad-based federal consumption tax, a carbon tax, and a higher federal gas tax.

Supporting low- and middle-income households: US government should support to improving educational opportunities and outcomes, offering childcare support for low- and middle-income families, and introducing paid family leave would encourage labor supply, raise human capital, and help reduce income polarization. Similarly, expanding the Earned Income Tax Credit, increasing the federal minimum wage, and improving the design of social assistance programs would help increase work incentives and support the most vulnerable.

Protect the Financial sector: To improve the US government economy it’s very important gain have been made in strengthening the financial oversight structure since the global financial crisis. There is scope to fine-tune some aspects of the system, notably to reduce the compliance burden for smaller banks. However, the current approach to regulation, supervision, and resolution should be preserved.

Getting the economic policy mix right: For US economical grow fiscal policy should aim for a gradual and sustained reduction in the general government deficit—brought about by both higher revenues and lower spending—to put public debt on a downward path.

On the monetary front the Fed should continue to gradually increase interest rates in light of incoming data, while reducing its holdings of securities in a predictable and well-communicated manner to avoid undue market volatility.