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In: Economics

Covid-19 pandemic and the US economic policy

Covid-19 pandemic and the US economic policy

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Expert Solution

COVID-19 pandemic has shaken the economy. Due to coronavirus pandemic small industries and businesses has impacted which has slowed down the economy. With situations involving huge numbers of tasks being cancelled and also increasingly avoidance of the hotels, restaurants, travel, and with the rapid descent of stock market, recession seems extremely likely. To help this situation caused due to the COVID-19, the economy needs a stimulus package which the combination forms of a monetary stimulus and fiscal stimulus. A stimulus package refers to a package by a government for the economic measures for stimulating a floundering economy. The main goal of the stimulus package is to reinvigorate the nation and reverse or prevent a recession by boosting spending and employment.
The U.S. Senate on March 26, 2020 voted for an approval of a stimulus bill amounting $2 trillion for providing the relief to individuals, families, small industries and businesses impacted due to the slowdown of an economy caused by the coronavirus pandemic. It is coordinated effort for increasing the government spending and lowering interest and tax rates for stimulating the U.S. economy. The stimulus package is in the combination form of a monetary stimulus and fiscal stimulus.
Monetary stimulus: The Federal Reserve reduced the rates of interest on the discount window by 1.5% to 0.25% along with $700 billion in quantitative easing (QE) or asset purchases. The capital requirements for banks are lowered. The banks are also encouraged by Fed for using the liquidity and capital buffers to lend, which are funds reserved to face the hard times
Fiscal stimulus: President Trump on March 6, 2020 approved 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.


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