Question

It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to worsening economic conditions. Ghana therefore, should prepare for the task ahead.

Required:

a) Identify the possible tasks ahead of government as implied in this case and discuss their impact on Ghanaians.                                                                                               

b) Propose practical measures necessary to mitigate such challenges                    

(NB: You may use diagrams where necessary)

Answer 1

a)

In the wake of the pandemic, it's evident that Ghana has suffered economically including permanent job layoffs, drop in household consumption, supply chain being disrupted and ultimately leading up to a slump in the Ghanaian economy. In totality the Aggregate Demand Curve has shifted towards the left accounting to these macroeconomic indicators of increase in unemployment, decrease in consumption and productivity. Apart from this due to the disruption in supply chain, the aggregate supply curve has also shifted. For a better understanding of the effect of the demand shock and the supply shock in this scenario, take a gander at the diagram below.

The real prices decrease from the equilibrium P to a lower price level P' caused due to the simultaneous shock in demand and supply. The output (GDP) slumps from Q to Q', which is also known as the recessionary gap. The decrease in output can cause issues of unemployment as discussed before. To reduce this gap, government announces expansionary monetary and fiscal policies which will be discussed in the next section.

The tasks for the government at present are many including the rising of household consumption by reducing the pessimism in the economy. People of Ghana will be thus able to consume more and help run the economy. After this the government needs to address the issue of unemployment which is a menace in a developing country like Ghana. Reestablishing the supply chain and ensuring that factories and businesses are at a minimum loss is one of the major tasks for the Government of Ghana. By virtue of addressing these issues, the people of Ghana can experience a rise in employment and the layoffs come to a halt.

b)

The government on the counsel of central bank can propose expansionary fiscal and monetary policies which could stimulate an economic boost in Ghana. Some of the measures which can be taken are:

• Decreasing the taxes so that the people have more savings at their disposal and therefore have the intention to consume a bit more.
• Decreasing the interest rates means that the borrowers have less burden on interest thereby borrow without hesitation. This along with the previous point ensures the money supply increases in the Ghanaian economy. This also encourages small and medium business to borrow and more thus setting up a better infrastructure themselves without the direct intervention of the government, therefore reducing the latter's burden by some amount.
• Government expenditure on infrastructure. This is vital as this promotes the creation of more jobs and restores optimism about the future of Ghana's economy. In situations where the private investments are not at par with the developmental goals of Ghana, especially in the current scenario, the government needs to step up with responsible expenditure to restore the market and bringing back the lost jobs. Ultimately this shrinks the recessionary gap experienced by Ghana

These are some of the ways in which the Government of Ghana can address the pressing issues in this pandemic.

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