Question

To stabilize the economy, what kind of policy you recommend to the Government: Active or Passive; rule or discretion? How do “Active and Passive policy” related with “rule and discretion”?

Answer 1

Active policy means that when the Federal government is trying to change the existing policy by introduction of new laws in management of the economy by increasing the tax spending or changing the current tax structure.

Passive policy of the Federal government will mean that it would not change anything related to the current structure of taxation and public expenditure.

I will recommend the Federal government to be more inclined towards active policy management because it will help in countering the adverse effect of coronavirus crisis as the economy will be needing more of the government spending and bailouts and it will be needing less of the taxation so government should be more proactive in spending of the public expenditure in order to support the economy and stimulate the demand in to the economy.

I will be advocating the government should be acting by the discretion, not by the rule making, and trying to support the economy in the short run by whatever amendment in the policy is needed.

Rules are related to mostly passive policy making because this will take time to get implemented whereas, discretion is related to active policy management and it is related to doing whatever is necessary in the short run in order to revive the economy so these are related to active as well as passive' management.