Question

The world has been struggling to contain the spread of the Covid-19 pandemic using measuring such as lockdowns and travel restrictions. These measures have created economic pain all across the world. To help ease the economic impact, governments and monetary authorities have mooted stimulus packages. Bank of South Africa, in particular, has taken a number of measures to support economic activity and avoid a collapse of the economy. Among these measures include: a decision to keep monetary policy unchanged despite rising inflation; $1 billion stimulus package for strategic sectors; promise to provide more liquidity to the money market. As a student of monetary policy, discuss the expected economic implications of these measures citing practical examples.

Answer 1

ANS

Government in many countries have given support for the Covid -19 pandemic and this support is been given on the monetary as well as non monetary basis depending on the requirements of the economy in many nations to increase the consumer demand and to make the market in equilibrium ,the increase in money supply in the market has given rise to the liquidity of money with public. This leads to increase in consumer demand and then led to increase in employment level of the economy and which therefore creates the rise income level.

In the situation the bank of south africa had provided the liquidity of 1 Million US dollar in the economy which gives an impact of increase in the liquidity in the economy ,it then leads to the increase in consumer demand and then the sectors who are been shut down because of low funds would be able to start their operations again and then they would be able to give employment and wages to their workers and employees and all these steps would eventually lead to increase in GDP. The practical example could be taken from the economy of India in which government has liquidated 350 crores INR to the medium and small scale enterprises and this eventually has lead to increase in GDP projection by 4%.