Question

1) examine the covid-19 impact on the Fiscal Policy and why?

2) how does the monetray policy fight the recession or depression ? explain

Answer 1

1. Fiscal policy refers to government spending in order to influence the economy. Government raises revenues through taxes and then spends it on multiple activities that influence the economy. The current pandemic has caused economies around the world to slow down. With businesses, closing down, unemployment rate raising, medical costs increasing and people having no sources of income. The government in the recent time has used the contractionary fiscal policy. Under this method the government spend a lot of its income and collected very little revenue as taxes.

Governments across the world have announced huge relief packages to boost the economy from its stages of recession. Government is investing money on health care, development of certain less affected industries, child and senior care, providing a minimum amount to help people sustain their basic needs.

These steps have been taken with the objective to boost the economic recession that the economies are going through due to Covd 19.

2. Monetary policy refers to the instruments or ways in which a government controls the flow of liquid cash in the economy. It uses 3 method to do it. Reserves ratios (CRR-cash reserve ratio and SLR- statutory liquidity ratio) Open market Operations and Discount rate.

a. Reserve ratios are the minimum requirements that banks need to keep with them in the form of liquid (CRR) with them. A hig

1. Fiscal policy refers to government spending in order to influence the economy. Government raises revenues through taxes and then spends it on multiple activities that influence the economy. The current pandemic has caused economies around the world to slow down. With businesses, closing down, unemployment rate raising, medical costs increasing and people having no sources of income. The government in the recent time has used the contractionary fiscal policy. Under this method the government spend a lot of its income and collected very little revenue as taxes.

Governments across the world have announced huge relief packages to boost the economy from its stages of recession. Government is investing money on health care, development of certain less affected industries, child and senior care, providing a minimum amount to help people sustain their basic needs.

These steps have been taken with the objective to boost the economic recession that the economies are going through due to Covd 19.

2. Monetary policy refers to the instruments or ways in which a government controls the flow of liquid cash in the economy. It uses 3 method to do it. Reserves ratios (CRR-cash reserve ratio and SLR- statutory liquidity ratio) Open market Operations and Discount rate.

a. Reserve ratios are the minimum requirements that banks need to keep with them in the form of liquid (CRR) with them. A higher CRR is used to contract money to avoid inflation. During recession the reserve ratio requirements will be decrease so as to allow for more cash to be given out as loan.

b. Open market operations refer to buying and selling of government securities. When government wants to increase the money supply during recession, it will buy securities in open market with its money and inject money in the economy.

c. Discount rate is the rate that the central bank will charge from banks when giving loans. When the government wants to increase money supply during recession, it will reduce the discount rate so that banks can borrow at a lower rate of interest and the rate of interest to the common public is also low.

her CRR is used to contract money to avoid inflation. During recession the reserve ratio requirements will be decrease so as to allow for more cash to be given out as loan.

b. Open market operations refer to buying and selling of government securities. When government wants to increase the money supply during recession, it will buy securities in open market with its money and inject money in the economy.

c. Discount rate is the rate that the central bank will charge from banks when giving loans. When the government wants to increase money supply during recession, it will reduce the discount rate so that banks can borrow at a lower rate of interest and the rate of interest to the common public is also low.