Question

If you were advising lawmakers, what would you recommend the U.S. fiscal policy response should be right now? Explain what you would recommend and how you expect it to impact our economic outcomes of unemployment, inflation, economic growth, and the debt/GDP ratio.

Answer 1

Ans.

- Current pandemic has impacted many world economies and key impacts of the COVID-19 pandemic on the global economy are that many economies including country stipulated here has suffered huge loss in the GDP , no country is spared and most of the global economies are forecasting significant reduction in world output.

- Because of current pandemic many global economies are facing twin shocks of Demand Shock and Supply Shock. Unemployment has increase sharply and globally almost 2.6 billion people are impacted. In many countries the unemployment has increased many fold.

- Government can use the tools of fiscal and monetary policy to improve the aggregate demand and supply and move the economy back to full employment.

- On the fiscal side, policymakers can reduce taxes or increase government spending.

- On the monetary side, the central bank can lower interest rates or increase the money supply. The problem, however, is that variable lags in the effectiveness of these policy measures imply that policy adjustments may end up reinforcing rather than counteracting underlying shifts in the economy.

- The current government needed to make a law based formative state by utilizing a portion of the dynamic methodologies which saw the politically-sanctioned racial segregation government making organizations. Appropriate actions will help to reduce unemployment, reduce inflation, improve economic growth, and improve debt/GDP ratio

Key Policy Responses taken by the US government are as follows :

- FISCAL : In August President Trump gave chief requests generally to address the terminations of certain Coronavirus reliefs gave by past enactments.

o These included I) utilizing $44 billion from the Disaster Relief Fund to give additional joblessness benefits; ii) proceeding with understudy credit installment alleviation; iii) conceding assortments of worker government backed retirement finance duties; and iv) recognizing choices to support leaseholders and mortgage holders evade expulsions and abandonments.

o US$483 billion Paycheck Protection Program and Health Care Enhancement Act. The enactment incorporates (I) US$321 billion for extra trivial Small Business Administration credits and assurances to help private companies that hold laborers; (ii) US$62 billion for the Small Business Administration to give awards and advances to help independent ventures; (iii) US$75 billion for clinics; and (iv) US$25 billion for expanding infection testing.

o An expected US$2.3 trillion (around 11% of GDP) Coronavirus Aid, Relief and Economy Security Act ("CARES Act"). The Act incorporates (I) US$293 billion to give one-time charge refunds to people; (ii) US$268 billion to expand joblessness benefits; (iii) US$25 billion to give a sanitation net to the most powerless; (iv) US$510 billion to forestall corporate insolvency by giving credits, ensures, and backstopping Federal Reserve 13(3) program; (v) US$349 billion in excusable Small Business Administration advances and assurances to help independent companies that hold laborers; (vi) US$100 billion for medical clinics, (vii) US$150 billion in moves to state and nearby governments and (viii) US$49.9 billion for global help (counting SDR28 billion for the IMF's New Arrangement to Borrow).