Question

Under the current pandemic, many governments provide cash transfer to citizens. A student commented that it is not an expansionary fiscal policy because government expenditure does not increase due to a transfer. Do you agree to this comment? Explain your answer.

Answer 1

I disagree with the statement. President Trump on March 6, 2020 approved for a stimulus package as spending bill for $8.3 billion for fighting the pandemic, currently termed to be the "Phase One" for the stimulus efforts. House of Representatives in U.S. approved an aid package totalling $2.2 trillion including a fund for $500 billion for assisting the hard-hit industries and a up to $3,000 direct payments of to millions of families in the country. These government transfers will help in increasing the disposable income and keeping a move in the economic activities; and protecting U.S. people from losing their employment and incomes, and organisation from bankruptcies; and enabling for the recovery. The main criticism for the transfer payments is that it does not produce outcomes which are advantageous for an economy. But with the cash transfer to citizens the government boost output in production or economic activity; and increasing the incentives to take paid work