In: Economics
The President of Ghana launched the COVID-19 business
alleviation program in collaboration with the National Board for
Small Scale Industries (NBSSI), Trade Associations, and some
selected banks. Under the program, the government is giving funds
without interest to selected financial institutions for onward
lending to businesses at a 3% interest. The program is aimed at
helping beneficiaries to sustain their businesses during the
Covid-19 pandemic. Use this information to answer the following
questions.
a. Explain in your own words, the monetary policy tool being used
by the government under this program.
b. If the government had pegged the interest rate under the program
at the monetary policy rate, will this have been a better way of
setting the rate? Explain the advantages and disadvantages of each
scenario. (7.5 Marks)
c. Explain the expected impact of the low-interest rate program on
gross domestic product (GDP), articulating the possible pathways.
(7.5 Marks)