Question

In a short essay (not to exceed two pages, not including graphs) discuss the following issues using the tools you have learned from micro- and macroeconomics this term.

Now you can be Norton’s “benevolent dictator” or the chief policy advisor to the President. What government policies should be enacted to help move the economic out of the covid-19 recession we are in now, while also moving toward a society where income or wealth is more equally distributed?  Use graphs when appropriate, and be sure to think past initial changes and focus on general equilibrium solutions that work in tandem with economic incentives for innovation and entrepreneurial activity.

Please write your answer in a Word file with your first name in the filename. Send it to my Webster address as an attached file by Monday, July 20, at 10 p.m. CDT.

Answer 1

Hi,

Hope you are doing well!

Question:

Answer:

COVID-19 and its impact:

COVID-19-19 is a global pandemic and affected the world badly. It has affected all the economic, social and political segment of a country. Because of it all the major economic activities like, trading, tourism, manufacturing, retail business etc affected and closed for a long duration because of lockdown. Most of the manufacturing activities, retail shops, local markets, educational institutes, religious places, tourist places etc are still close. Because of this things the consumer's and investor's confidence has decreased rapidly and its affected the aggregate demand in the economy and decreasing aggregate demand has decreased the total output and inflation. Because of decreasing consumption, investment and increasing uncertainty about the future has decreased the aggregate demand and production that has increase the unemployment level and income level of people globally. Millions of people have lost their jobs and another millions of people are facing the problem of pay cut and working at lower level of wages. Millions of people have tested positive and thousands of people have lost their lives globally. Thousands of small firms and companies have closed or facing a serious financial problems.

Government policies that enacted to help move the economic out of the COVID-19 recession we are in now:

This is global Corona crisis and during this period the main challenges for a government are to increase inflation, employment and GDP growth. A stable and reasonable inflation rate, low unemployment and high growth rate should be the main objectives of the government during this period. To achieve these goals or objective government should work with Fed together. A government should follow an expansionary fiscal policy and should increase the government spending.

The government should follow a smart long term and short term strategies that are following as:

1. Government should increase the spending. Government spending includes all the  includes all government consumption, investment, and transfer payments. This time government should more spend on healthcare to increase the quality of health service to save more and more life. Government should increase the spending on research and development, social securities like, provision for retirement pensions, disability insurance, survivor benefits and unemployment insurance.

2. Government should provide tax relaxation and discount. Government should provide relaxation in EMI payment, credit card payment, tax filling etc. Also government should change the tax structure and motive to investors and consumer for investing and consuming more.

3. Government should increase transfer payment. Government should provide subsidies and announcing stimulus packages to pump money in the pocket of the needy people. Government should provide packages for the small businesses, retailers, export industry and primary sector also. It will in reducing the unemployment and increasing investment and demand in the economy. Providing cash aid to current holders of Electronic Benefits Transfer system.

Economic incentives for innovation and entrepreneurial activity:

Government should encourage the entrepreneurs and entrepreneurship and focus and new innovation. Now things have been changed and the behavior of consumers and structure of market has been changed rapidly. Now people are focusing on and preferring to digital platforms and because of it, its open a new opportunities of IT, E-commerce, social media companies. Its also open the door for new creative idea and innovation and lot of opportunities for the new entrants. Government should make easy of doing business and provide different types of subsidies and other benefit to the new start-ups. It will helpful for new job and opportunities creation and reduce the pressure on existing labor market that will reduce unemployment in the economy.

How to minimize income inequality:

These days income inequality became a major issue and challenge for the economy and government. So, reducing this this income inequality government should provide support to the lower section or poor section of the Society. Government should help them though increasing government transfers, social securities and revolution in labor market. Government should increase the minimum wages, improving working conditions, other cash benefits and securities. There is big gap in salary between senior and junior executives that also increasing the gap of income that increased income inequality. Government should levy higher tax on millionaires and billionaires and reduce the loophole in corporate taxation policy. Government should also provide platforms and space to the small and medium enterprises through add-on benefits and subsidies.

Conclusion:

Government should follow a expansionary fiscal policy and increase spending, transfer payment, reducing tax and providing other tax benefits. Government should also focus on innovation, entrepreneurship, decreasing income inequality and protect SME sectors.

Thank You